Impact of Dividend Stability on Car Manufacturers and Spare Part Manufacturers of Europe

Dividend policy is an important part of the financial policy of modern companies and is one of the tools that ensures the investment attractiveness of the company. The mechanism of distribution of net profit has a special influence on the value of the company. In practice, the adoption of management decisions are carried out within the framework of the dividend policy. The implementation of an optimal dividend policy is one of the important areas of activity of a financial manager and requires a deep understanding of the impact on its factors as well as its relationships with other management decisions. The question of how to have an optimal dividend policy is one of the most discursive topic for researchers. This research will show how stable the dividend policy is for European car manufacturing and spare part manufacturing companies. These countries include Austria, Finland, France, Germany, Italy, Netherlands, Portugal, Spain and Sweden. In this study, we examine the dividend policies of 24 European automotive industry companies from 1998 to 2018. To understand the dividend distribution policy, we used the prominent Lintner’s model in a panel data setting. The results showed that the auto industry has a stable dividend policy. This finding is in line with the findings in developed and developing countries that companies use dividend smoothing. The main factors influencing the changes in the payment of cash dividends are past dividends and current earnings, and the most influential determinant is the level of lagged dividends. Keywords: Dividend Policy, Dividend Stability, Lintner’s Model