Catering and Dividend Policy: Evidence from the Netherlands over the Twentieth Century

Abe de Jong*, Philip T. Fliers, H.C. van Beusichem

*Corresponding author for this work

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This paper investigates the determinants of Dutch firms’ dividend policies in the 20th century. We identify three distinct episodes and document shifts in dividend policies in the 1930s and 1980s, because firm managers cater to the changing preferences of shareholders. The first episode, prior to the Second World War, was characterized by dividends that were fixed contracts between shareholder and management and the payouts were mechanically determined
by earnings. The second epoch of Dutch dividend policy, until the 1980s, was characterized by dividend smoothing. Dividends were still strongly related to earnings, but because of shareholder’s preferences for stable dividend income, earnings changes are incorporated in dividends with a lag. Finally, dividend policy in the most recent episode is inspired by shareholder wealth maximization, based on agency and signaling motives. In this period, dividends have become largely decoupled from earnings.
Original languageEnglish
Pages (from-to)321-358
Number of pages38
JournalFinancial History Review
Issue number3
Publication statusPublished - 1 Dec 2019


  • Dividend policy
  • Catering theory
  • Netherlands
  • Financial history

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