Why do companies pay dividends?: A comment

Abstract

This study reviews one of the unresolved research puzzles in corporate finance; why do companies pay dividends? In this context, a qualitative study dealing with content analysis is carried out based on the theoretical and empirical research. After critically reviewing 407 research articles in dividend policy, 50 empirical studies were taken as the sample based on the relevancy to the research puzzle. The content analysis has provided some significant insights and stylized facts with regard to the corporate dividend policy. However the previous research studies were fundamentally flawed in their design based on quantitative approaches in order to elucidate a behavioural explanation. As a result, most of the study findings cannot be relied upon to see consistency with the theories in question. Despite years of theoretical and empirical evidences, the findings show that the dividend puzzle is still remaining as unresolved research phenomenon in corporate finance due to lack of unanimity among the researchers over the explanations. This study provides the reader an all-embracing understanding on the theories and empirical explanations over the dividend puzzle. It is imperative for the researchers to focus on all empirical and theoretical explanations in a single study and test them simultaneously in a triangular approach in order to have a single consensus over this puzzle. Thus, developing a new paradigm or models to deal with the dividend puzzle is suggested, until then the deduction of various theories in different studies are inconclusive and inconsistent