Abstract
Decision making about dividend payout is one of the most important decision that companies should encounter. Identifying factors that influence dividends can help managers in making an appropriate dividend policy. In the other side, companies’ dividend payouts over time and with a stable manner may influence on stock price, future earnings growth and finally investor's evaluation about owners' equity. Hence, investigating the factors influencing dividend payout ratio is of high importance. In this research, we investigate the effects of various factors on dividend payout ratio of Tehran Stock Exchange (TSE) listed companies. We use time series regression (panel data) in order to test the hypothesis of this study. This study provides empirical evidences by choosing a sample of 102 companies over the time span of 2005-2010. The result shows that independent variables of free cash flow and profitability current ratio have negative and significant impact on dividend payout ratio; whereas, the independent variable of leverage ratio has a positive and significant impact on dividend payout ratio. The other independent ratio such as size of the company, growth opportunities and systematic risk do not have any significant influence on dividend payout ratio.
Highlights
Dividend has long been an important issue for financial researchers and it has remained as one of the most controversial issues in the field of financial management (Grullon et al, 2002). Arnott and Asness (2003) investigated whether dividend policy, as observed in the payout ratio of the U.S equity market portfolio, could predict future aggregate earnings growth or not
We investigate the effects of various factors on dividend payout ratio of Tehran Stock Exchange (TSE) listed companies
That is why investigating the factors that influence dividend payout ratio is of high importance, so in this research we investigate the factors influencing dividend payout ratio in Tehran Stock Exchange (TSE)
Summary
Dividend has long been an important issue for financial researchers and it has remained as one of the most controversial issues in the field of financial management (Grullon et al, 2002). Arnott and Asness (2003) investigated whether dividend policy, as observed in the payout ratio of the U.S equity market portfolio, could predict future aggregate earnings growth or not. Arnott and Asness (2003) investigated whether dividend policy, as observed in the payout ratio of the U.S equity market portfolio, could predict future aggregate earnings growth or not. Dividend payout ratio plays a significant role in determining the value and assessing shareholders’ equity of the firm. It appears that a stable dividend payout over time has a positive relationship with future earnings growth. We examine the relevance between dividends payouts ratio and future earnings growth Tehran Stock Exchange (TSE) listed companies because of the high importance of it. That is why investigating the factors that influence dividend payout ratio is of high importance, so in this research we investigate the factors influencing dividend payout ratio in Tehran Stock Exchange (TSE)
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