Tomas Hjelström

In the Study on directors' duties and sustainable corporate governance prepared by EY Italy for the European Commission, dividend policies are used as a key indicator for financial short-termism. The study claims to identify short-termism among European companies and is set to be used as an empirical foundation for the Commission’s work towards a new regulation that is claimed to support long-term investments and greater sustainability. In this report, we scrutinize the claims of the study by examining potential signs of financial short-termism related to excessive dividend policies. Studying companies listed on the Swedish stock market, which has one of the largest market capitalizations within the EU as well as a vibrant IPO market, our dataset includes 786 unique firms and 7,389 firm-years during the years 2000-2019. Our empirical findings demonstrate that (1) 44 % of companies do not pay out a dividend, (2) the payout ratio of the firms depends on their life cycle, and (3) the firms with the highest dividend payout are also the firms with the highest profitability while at the same time performing well in terms of sustainability reporting and sustainability ratings. Thus, we see no material indications of financial short-termism in Sweden, and also caution against changing a well-functioning system (both in sustainability and financial terms).

This report presents findings from an interview-based study of capital market actors’ use of interim and annual reports. We would like to thank all interviewees who generously took time to share their practices, experiences and views with us. Without you, this research would not have been possible. The study was initially conceived following discussions with representatives of the Swedish Enterprise Accounting Group (SEAG), a group within the Confederation of Swedish Enterprise. The Confederation of Swedish Enterprise has kindly supported the research by financing direct outlays for travel and transcriptions. However, all conclusions are our own.