Search results

The purpose of this paper is to identify the determinants of dividend policy in an emerging and developing market.

The study employs a quantitative approach using 191 Sri Lankan firms and 1,337 firm-year observations as the sample. The authors apply a Binary Logistic Regression model to uncover the determinants of the propensity to pay dividends, and a Fixed Effect Panel Regression to investigate the determinants of dividend payout.

The authors identify past dividend decision, earnings, investment opportunities, profitability, free cash flow (FCF), corporate governance, state ownership, firm size and industry influence as the key determinants of propensity to pay dividends. In addition past dividends, investment opportunities, profitability and dividend premium are identified as the determinants of dividend payout. Moreover, there is a feedback between dividend yield and profitability in one lag and between dividend yield and dividend premium in two lags, as short-term relationships. Hence, past dividend decision or payout, profitability and investment opportunities are a common set of determinants with implications for both propensity to pay dividends and its payout. The findings support theories of dividends such as signaling, outcome, catering, life cycle, FCF and pecking order.

The findings are important for investors, managers and future research. Investors should focus on the determinants identified by our study when making investment decisions whereas managers should practice the same when formulating appropriate dividend policies for their firms. Future research should rely on propensity to pay dividends and its payout simultaneously to promote a theoretical consensus on the dividend determinant puzzle.

This is the first study that investigates determinants of propensity to pay dividends and dividend payout along with short-term relationships in a single study.

The purpose of this paper is to identify the dividend policy determinants of Sri Lankan firms and why they pay dividends.

The study uses several quantitative approaches to investigate dividend determinants using market (secondary) data of 190 Sri Lankan firms and 1,330 firm-year observations. Dividend determinants are also identified using survey (primary) data from 141 of the 190 firms. Triangulation is then used to facilitate validation of the data through cross-verification from two data sources.

Analysis of the market data reveals that firm size, industry impact, corporate governance, free cash flow, earnings, past dividends, profitability, investment opportunities, net working capital, concentrated ownership structure and investor preference represent the most important dividend determinants. Survey data confirm these findings. The evidence supports the pecking order, signaling, free cash flow, catering and outcome theories using both secondary and primary data and the bird-in-the-hand theory using survey data.

The findings are useful not only for corporate decision makers in establishing an appropriate dividend policy but also for shareholders in making investment decisions. Because the current study is limited to Sri Lanka, future researchers should study the same phenomenon in other countries using the triangulation approach.

This study provides a hybrid approach to dividend policy research by using both primary and secondary data in a single study. It is the first dividend study in Sri Lanka to use a triangulation approach.

Introduction: Why companies pay dividends and the determinants of dividend policy are considered an unresolved dividend puzzle. To reach a consensus over the puzzle, researchers must investigate the factors affecting dividend policy by incorporating all the determinants into a single research effort.

Purpose: We examine the dividend policy determinants of Sri Lankan firms, explicitly focusing on the banking, finance, and insurance (BFI) sectors.

Methodology: This study uses the quantitative approach applying the Generalized Method of Moments (GMM) system to examine the dividend policy determinants by obtaining secondary data from 51 listed BFI organisations in Sri Lanka.

Findings: The analysis disclosed that the variables of changes in revenues, firm size, liquidity, corporate tax, business risk, and profitability have a positive relationship with dividend yield, whereas investment opportunities, leverage, change in revenues, corporate tax, and firm size impact positively on the propensity to pay dividends in BFI organisations in Sri Lanka. Our findings opine that managers in the BFI industries should prioritise changing their dividend policies by paying close attention to factors, such as dividend yield, changes in revenue, firm size, liquidity, corporate tax ratio, business risk, and profitability because the dividend policy is critical to retaining current investors and luring new ones.

Ever since the work of John Lintner (1956), followed by the work of Miller and Modigliani (1961), dividend policy remains a controversial issue. Some of the questions that remain unanswered include: Does dividend policy affect value? What are the factors that determine dividend policy? Is dividend policy determined dependently or independently? A comprehensive survey project on dividend policy in Kuwait was conducted and two papers were produced. The first paper focused on the relationship of dividend policy to investment and financing policies, see Al‐ Deehani and Al‐Loughani (2002). This paper is a part of that project. It presents empirical effort to the area of dividend policy determinants in Kuwait as an emerging market. Based upon a result of a questionnaire survey, the paper will highlight (1) top management’s perception of value‐relevant and value‐irrelevant determinants of dividend policy, and (2) determine whether managers in different industries share similar views about these determinants. The paper is organized in the following manner: first the determinants of dividend policy are discussed through a review of the relevant literature. This is followed by the research methods stating the issues of concern to this study. The remainder of the paper discusses the results through the analysis of managers’ perceptions of determinants and a cross‐sectional analysis. The paper ends with a summary and the conclusions drawn from the study.

This chapter provides an overview of the explanations and factors affecting dividend policy. This study employs a systematic literature review approach to review a large sample of studies related to the dividend puzzle. Although the analysis reveals mixed evidence involving the theories and determinants of dividend policy, some determinants appear in numerous studies. However, no consensus exists on an optimal dividend to resolve the dividend puzzle, and the authors propose a model to deal with the same. When examining dividend policy, researchers should consider the firm, market, behavior, and other determinants. When making significant dividend or stock decisions, managers and shareholders should also contemplate the factors, interactions, inadequacies, and consequences. Future researchers should strive to take a more comprehensive view when resolving the dividend puzzle. This study provides a current and complete picture of dividend policy's available theories and empirical determinants. Its significant contribution is identifying some of the more consistently essential determinants of dividend policy while proposing a holistic model to address the prevailing dividend dilemma.

This paper aims to make an attempt to identify the determinants of dividend policy by analyzing 125 real estate companies, which are selected on the basis of consistent dividend distribution throughout the study period. Most of these companies either listed with Bombay Stock Exchange or National Stock Exchange.

This paper applies three alternative methods to verify and validate the results obtained from each other method, namely, fully modified ordinary least square (FMOLS), dynamic ordinary least square and generalized method of moments (GMM). Data collected of the selected companies’ post-recession period i.e. 2009-2017. The selected companies have age either 5 years old or more when data are retrieved from the above-mentioned sources. Due to much volatility in the recession period in the real estate firms at the global level, no data have been taken of the firms before March 2009. Moreover, for arriving at good analysis and an adequate number of observations for the study more recent data have been taken.

Empirical findings of this research paper depict that firm previous dividend, firm risk and liquidity are strong predictors of future dividend payout ratios (DPRs). The results indicate that firm risk as measured through price-earnings ratio (PE ratio) has a positive association with a DPR of selected real estate firms. Lagged DPR used in the GMM test as an exogenous variable is showing positive significant association with DPR. Firm’s growth is found significant in FMOLS and GMM techniques. On the other firm’s size is found significant according to cointegration techniques.

The present study shall be useful to different stakeholders of real estate companies. Various significant determinants as identified can be used by management for designing optimum dividend policy and providing maximum benefits to existing shareholders. Similarly existing and prospective shareholders may predict the future payment of dividend and accordingly they may take investment decisions in these firms, as the future fund’s requirement of a firm depends upon dividend payment and retention ratio.

As per the authors’ knowledge, there is no single study carried in the post-recession period to predict determinants of dividend policy of real estate sector using three alternatives of methods to verify and validate the results obtained from each other method. The study is carried out after exploring determinant from a diverse range of period of studies (oldest one to latest one).

The purpose of this paper is to investigate the views of chief financial officers (CFOs) of Iranian firms listed on the Tehran Stock Exchange about the factors influencing dividend policy in 2006. The paper aims to update and extend previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms.

Survey instruments were used to identify the factors that CFOs consider in formulating dividend policy, based on both theoretical and empirical works on dividends, to identify the factors that are most important in dividend policy of firms.

The findings show that the most important determinants of a firm's dividend policies are the stability of cash flow, the availability of profitable investment opportunities, and stability of profitability. Also, industry type appeared to influence the importance that respondents placed on one determinant of dividend policy.

It is likely that the firms that did not respond on time may show a non‐response bias. Despite lacking normal precautionary steps to increase the response rate, non‐response bias may affect the findings. Another limitation of the survey methodology was that it measures beliefs and not necessarily actions. Therefore, caution should be taken in generalizing the findings.

The findings have implications for CFOs in formulating dividend policy.

The paper updates and extends previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms.

This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm‐level panel data set of all publicly traded firms on the Amman Stock Exchange between 1989 and 2000. The study develops eight research hypotheses, which are used to represent the main theories of corporate dividends. A general‐to‐specific modeling approach is used to choose between the competing hypotheses. The study examines the determinants of the amount of dividends using Tobit specifications. The results suggest that the proportion of stocks held by insiders and state ownership significantly affect the amount of dividends paid. Size, age, and profitability of the firm seem to be determinant factors of corporate dividend policy in Jordan. The findings provide strong support for the agency costs hypothesis and are broadly consistent with the pecking order hypothesis. The results provide no support for the signaling hypothesis.

The purpose of this study is to examine the influence of firm characteristics such as profitability, growth opportunities, size, leverage and maturity on dividend policy of Indian firms.

The study analyzes the determinants of dividend policy of manufacturing firms in India using panel data. Because of the non-linearity behaviour of dividend pay-out by firms, the study uses quantile regression method to examine whether the determinants of dividends vary depending on the company’s level of dividends.

Overall, the results show important difference between ordinary least square and quantile regression estimates and depict differential effect on dividend at different levels. The notable difference occurs because either the significance changes (e.g. for profitability and growth opportunities) or because the magnitude of coefficients changes (e.g. for size, profitability and growth opportunities).

This finding is useful in identifying the dividend issuing companies. Further, results of this study would be helpful to the mangers to manage their financial positions that subsequently help in retaining and attracting the probable investors.

The study aims to examine the dividend omissions and dividend cuts behaviour of manufacturing and non-financial services firms to identify the determinants of dividend omissions and dividend cuts.

The study analyses the financial data of 3,546 firms from 2011 to 2020 (35,460 firm-year observations) using a dynamic random-effect probit panel regression model.

The results suggest that profitability, growth opportunity, leverage, liquidity, risk, extraordinary income, shareholding pattern and buyback are major determinants of dividend omissions. Similarly, dividend cut in the previous year, profitability, operating cash flow, risk and extraordinary income are major factors leading to dividend cuts.

Firms which omit the dividend are less likely to start paying dividend in subsequent years, whereas firms which cut the dividend may increase dividend in later years. Also, profitability decreases for a significant number of firms post dividend omission and cut. This indicates that dividend omission is a more prominent signal than a dividend cut for the financial health of a firm.

The determinants identified in the study enable analysts and portfolio managers to decide the propensity of dividend omission and cut even before actual announcements and can alleviate the significant loss in the portfolio. Also, managers and the board of directors would be able to monitor the firm’s financial performance to avoid the situation leading to dividend omissions and cuts.

The study strongly recommends that firms should voluntarily pay dividends to shareholders to encourage the healthy participation of retail shareholders in the equity market and create a long-term win–win situation for all stakeholders in society. If a large number of firms continue not to pay the dividend, the study appeals to the regulators to intervene to protect shareholders' interests for the greater good of society.

To the best of author’s knowledge, this is the first study to empirically identify the determinants of dividend omission and cut in the unique setting like India where dividend taxation had undergone a significant change.