Smoothing among Danish Listed Companies

Abstract

This thesis investigates the degree of smoothing of shareholder distribution among Danish listed companies and relates cross-sectional variation of smoothing to existing theories of agency problems and information asymmetry. The usage of share repurchases for the purpose of shareholder distribution has developed into a level equivalent to that of cash dividends. This thesis concludes smoothing as a prevalent phenomenon among Danish companies, however, more distinct when measured in cash dividends than in total payout. It is found that smoothing is associated with companies characterised by high earnings volatility, low leverage, and low payout ratios. Only earnings volatility and payout ratios stay significant when measuring smoothing of total payout. These results indicate that smoothing is associated with information asymmetry and agency problems as suggested by theoretical literature.