By Andrew Benito and Garry Young
The payment of dividends is one of the key unresolved puzzles of company financial behaviour. The importance of understanding dividends also partly stems from their significance as a form of balance sheet adjustment. But relatively little is known about the determinants of a company's propensity to omit or cut its dividend in a particular year. The analysis presented in this paper, which addresses such issues, can also be interpreted in the wider sense of examining how firms respond to financial pressure.