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Abstract

This paper identifies the factors which determined the dividend and depreciation policy of early coal companies from surviving accounting records. It is found that, after the Companies Acts of 1844-1862, there was no change in dividend policy from that prevailing in partnerships: the distribution of a substantial steady percentage of the operating surplus. Most coal companies adopted this policy throughout the period 1860-1914. By 1885, a few companies had changed to paying a constant dividend, expressed as a fixed percentage of the paid-up share capital. Depreciation policies were much less consistent, particularly for companies in financial difficulty. Directors could choose whether to distribute trading surpluses as dividends, or retain them in the company as depreciation or revenue reserves, and the dividend payment was consistently given preference over any provision for depreciation. This may have led to a lack of cash for re-investment or even an erosion of the capital base of some companies. These results provide evidence on the faults and virtues of the Victorian entrepreneur in industrial capitalism.

Keywords

Dividend policy payout depreciation coal companies

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Did dividends dictate depreciation in British coal companies 1864 - 1914?

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