In addition to the test sample, I construct a control sample by matching every company that paid scrip dividends with a similar company that paid only cash dividends.
9) Column 3, Table 1, reports the number of companies in each industry group that paid scrip dividends.
Three proxy variables capture the taxation impact on the decision to issue scrip dividends.
Moreover, if firms in financial distress issue scrip dividends, their capacity to raise external finance should be lower -- and their leverage higher -- than that of control firms.
12) As in Lang, Stulz, and Walkling (1991), a variable identifying firms that simultaneously have low investment opportunities and high cash flow is constructed to separate the free-cash-flow explanation of scrip dividends from the cash-shortage proposition.
Firms announce their intention to pay scrip dividends when they announce their quarterly, interim, or final earnings.
These results imply that scrip dividends are not offered by companies that suffer from ACT problems.
Firms that issue scrip dividends do not report larger recoverable ACT, do not have lower taxable profits, and do not generate higher overseas sales than the control firms.
Firms that pay scrip dividends appear to be highly levered and exhibit significantly higher dividend yields than does the control group.
The results show that there are statistically significant differences in the growth opportunities and size between firms that pay scrip dividends and those that do not.
Panel D of Table 4 shows that there is no significant difference in the subsequent period's growth in earnings between firms that pay scrip dividends and those that do not.