Dividends: Publicly Listed Brazilian Companies’ Propensity to Pay or Not to Pay

We exploit a feature in Brazilian regulation that requires firms to pay a minimal dividend (depending on the firm’s bylaws and yearly income) to study the factors influencing firms to pay above minimum rates. Due to this fact we consider their desire to pay occurs only when they pay an amount higher than this minimum, otherwise it is their law or contractual obligation fulfillment. To this end, a logit model was employed to separate firms that pay their obligatory minimum (legal & contractual) from those that pay rates higher than the minimum and then a multiple regression model was used to test which variables influenced the firms in the second of these groups to pay higher dividends, analyzing a sample of 1118 dividend distributions from 2007 to 2011. It was found that the variables debt, investment, ownership concentration and stability of dividends policy influenced companies listed on the Brazilian stock exchange to pay higher remuneration rates than their obligatory minimums. This study contributes to understanding of the subject of dividends by focusing on the “extra” portion, meaning real decision to pay dividends. No legal and bylaws deep interpretation may bring us a misunderstanding of financial decisions.