Abstract
Several prior studies find that firms pursue a long-term dividend target payout ratio with a fairly standardized speed of adjustment in developed markets. However, some studies conducted in emerging markets show strange findings that firms have target dividend payout ratios but they fail to follow stable dividend polices. This study examines dividend policy behavior in Vietnamese stock market, an emerging stock market without mandatory dividend payment using fixed effects regression for panel data. The research results support the partial adjustment model that firms in Vietnamese stock market have stable dividend policy behavior.
Highlights
Dividend policy behavior is a debatable topic in corporate finance literature and considered as “dividend puzzle” with several theories which are developed to explain it
This study investigates dividend smoothing in an emerging stock market, namely Vietnamese stock market which is established in 2000
Both of them are measured in Vietnamese Dong (VND)
Summary
Dividend policy behavior is a debatable topic in corporate finance literature and considered as “dividend puzzle” with several theories which are developed to explain it. There is a line of hypothesis stating that firms follow stable dividend behavior initially developed by Lintner (1956) In his pioneering study, Lintner (1956) find that firms listed in U.S stock market tend to pursue a long-term dividend target payout ratio with a fairly standardized speed of adjustment. Glen (1995) concludes that firms in emerging markets have target dividend payout ratios but they do not pursue stable dividend polices. This is confirmed by the research of Adaoglu (2000) in Istanbul Stock Exchange where dividend payment is mandatory.
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