Do dividend policies of privately held firms follow a life cycle?

We investigate whether the dividend policies of privately held firms follow a predictable pattern that parallels their life cycles. Our analyses are based on a large sample of 113,599 Belgian privately held firms with 666,135 firm-year observations that cover the period from 2005 to 2018. We find that as the retained earnings of privately held firms increase, they are more likely to pay dividends and to pay higher amounts. We find a significant effect of retained earnings on dividend policy in a subsample of established firms, but not in a subsample of young firms. Firms are also more likely to initiate (omit) a dividend as their retained earnings increase (decrease) over time. Overall, our results support the life cycle theory in the context of privately held firms.