Dividend Policy and Financial Distress: An Empirical Investigation of Troubled NYSE Firms

摘要: This paper studies the dividend policy adjustments of 80 NYSE firms to protracted financial distress as evidenced by multiple losses during 1980-1985. Almost all sample reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent covenants, dividends are cut often omitted, suggesting that managerial reluctance is omission not simply reduction dividends. Moreover, managers with long histories appear particularly reluctant omit Finally, some reductions seem strategically motivated, e.g., designed enhance firm's bargaining position organized labor. THIS PAPER STUDIES THE The prospect such distress, while generally viewed a first-order determinant optimal capital structure, has heretofore been largely ignored analyses policy. lack attention dividend-distress link perhaps traceable belief adopt conservative payout policies so future will be necessary. It probably also attributable general perception rarely affect publicly held because any nominally readily waived lenders. Our most striking finding lends credence agency view significantly even largest firms. However, many when were far from binding, considerations clearly exclusive our sample. We find that, absent omissions unattractive, would mark themselves first whose generated insufficient cash pay