THE FACTORS THAT AFFECT THE DIVIDEND POLICY OF THE GREEK LISTED FIRMS PRIOR TO THE ECONOMIC CRISIS: A COMPARISON TO NYSE, NASDAQ, NORWEGIAN AND U.K. FIRMSâ

Eriotis Eriotis

doi:10.3844/ajebasp.2013.139.152

Abstract

This study presents, analyzes and compares the factors affecting the dividend policy of the Greek listed firms, prior to the Greek economic crises, to NYSE, NASDAQ, Norwegian and U.K. firms. Our empirical investigation has a dual objective, to record the dividend policy of the Greek firms and to compare their dividend choices to other, more financially mature, markets. We sent to all Athens Exchange listed firms a detailed questionnaire concerning their dividend choices. Our findings proved to be very interesting since the average listed Greek firm shares the same opinion with the average firm of the compared studies in the following areas: Price affection, risk bearing, past dividends’ pattern and agency costs. Some of our findings proved to be quite close with some of the results of the compared studies in the following subjects: The sector of the company, the target payout ratio, the financing ability and the information content of dividends. Finally, some of our findings are in contradiction to some of the results of the previous studies, these are: The impact of taxation on dividends and the legislation framework.

Highlights

Desires and choices, the creditors constrains and the country’s institutional foundations
Even though a unique solution seems not to exist, there is strong evidence that dividend policy is a puzzle (Black, 1976; Baker et al, 2002) and the final choice is a product of complex decision making based on parameters that vary with time, place and conditions (Poutos, 2009)
As sub-question to Q1, we asked those who supported that the dividend affects the value of the firm (Q1.1) (Table 3): “Why dividends affect the value of the firm?” The 40.8% of the 76 firms, that answered this question, supports that dividends affect the value of the firms due to the reduced risk that dividends bear, the 23.6% due to taxes and the remaining 32.9% for other reasons, which they did not specify

Summary

Introduction

Desires and choices, the creditors constrains and the country’s institutional foundations It is true that nowadays the global economy faces an economic crisis which has already affected many countries and has great impact on financial markets Under this economic environment, where there are limited and expensive opportunities, we wonder if the dividend policy of the firms remains an Corresponding Author: Eriotis, N., National and Kapodistrian University of Athens, Greece. Given that the global financial system is dynamic, the values of the assets are changing continuously and generate, sometimes (like nowadays financial crisis), extreme changes in our wealth These continuous changes in prices affect either positively or negatively the value of the capital; the only source of zero or positive returns is the dividend payments, which, normally, follow the fluctuations of corporate earning and the changes in corporate investment policy (Lintner, 1956; Fama and Babiak, 1968; Nakamura and Nakamura, 1985).

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Discussion

Conclusion