Research-Thesis: The determinants of dividend payments in privately held firms in Belgium

Abstract

This thesis investigates the determinants of dividend payments in privately held firms in Belgium, a subject that remains significantly underexplored despite the dominant role of private firms in most economies. Using a panel dataset of 24,048 Belgian privately held firms covering 102,194 firm-years over the period 2018 to 2024, the study estimates three complementary models, a pooled binary Logit for dividend propensity and two left-censored Tobit models for dividend intensity to examine how firm-level financial characteristics and ownership structure explain payout decisions. The results confirm seven hypotheses. Profitability is the dominant and universally consistent determinant of dividend policy, with a coefficient virtually identical to Cadenovic, Deloof and Paeleman (2023) for an earlier Belgian sample, providing strong cross-period validation. Leverage constrains dividends through debt service obligations and creditor restrictions, most strongly for smaller firms and those organised under the SRL legal form. Growth opportunities are negatively associated with dividend propensity and intensity, consistent with the residual dividend theory. Size and age are both positively associated with dividend behaviour, confirming the life cycle hypothesis. Family ownership increases dividend propensity and intensity in the full sample, but this effect is driven exclusively by smaller SRL firms where owner-managers rely on dividends as their primary source of personal income, a finding that directly addresses a gap identified in the prior literature. The COVID-19 pandemic produces a paradox: firms were more likely to pay dividends during 2020–2021 but paid smaller amounts, reflecting divergent income extraction and precautionary motives across firm size groups. The thesis makes three contributions: it extends Belgian evidence to a post-2018 period that includes the COVID-19 shock; it introduces family ownership as an explicit determinant of Belgian private firm dividend policy; and it proposes dividends scaled by total assets as a superior intensity measure for studies where cash flow data availability is uneven. Limitations include the absence of liquidation reserve and double distribution test variables, the short observation window, and the bluntness of the binary family firm proxy.