Dividend Smoothing in Sweden - An Empirical Investigation of Determinants of Dividend Smoothing

Sammanfattning: Purpose: The main purpose is to see if dividend smoothing is a pertinent phenomenon among Swedish public firms. The study also aims to identify what firm characteristics that drive dividend smoothing. Theoretical Framework: The theoretical framework covers different explanations of dividend smoothing behavior, such as information asymmetries, agency issues and investor clientele motivations. Also, share repurchases are given as an explanation of dividend smoothing behavior. Empirical Foundation: The study covers firms listed on Nasdaq OMX Stockholm, that have been paying dividends every single year during the period of 2001-2012, or for as long as the company has been listed, for a minimum of 7 years. 85 companies are making the cut. Methodology: Quantitative approach using Lintner’s partial adjustment model as well as multiple regression analyses. Conclusion: Dividend smoothing seems to be an occurring phenomena among Swedish public firms. The results of this study mainly support agency theory as being a determining factor of dividend smoothing, while there is no support for information asymmetry and investor clientele motivations. Further, firms that repurchase shares seem to be more likely to smooth their dividends than other firms.