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| | | Article Name : | | | Determinants of Dividend Smoothing:
Evidence from Pakistan | | Author Name : | | | ZAHID ALI1, SHUAIB ALI, NADIA HIDAYAT | | Publisher : | | | Bridge Center | | Article URL : |  | | | Abstract : | | | Dividend smoothing presence is evidenced continuously in
corporate finance literature since 1956 when it was firstly addressed by
Lintner. This article aims to determine, what causes the difference in
the level of dividend smoothing across firms. The study empirically
examines the determinants of dividend smoothing in the listed nonfinancial listed firms on Pakistan Stock Exchange for the period 2005-
15. The study used two measures of dividend smoothing i.e. speed of
adjustment (SOA) and relative volatility (Rel_Vol). The study
incorporated Tobit regression in case of speed of adjustment and OLS
in case of relative volatility for determining determinants of dividend
smoothing. The study founds that small firms with low cash flows and
high leverage firms smooth more in Pakistan. Similarly, old firms
with more tangible assets and high stocks beta smooth more their
dividends. Beside that firms whose investors are having long investment horizon, opt for low level of dividend smoothing. our results
are explainable by agency and information asymmetry theories of
dividend smoothing. The study is expected to contribute in designing
the optimal dividend policy in accordance with the information
asymmetry and agency conflict faced by the firms. | | Keywords : | | | Dividend smoothing; Agency Problem; Information
Asymmetry; Tobit regression; Pakistan |
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