European Academic Research ISSN 2286-4822
ISSN-L 2286-4822
Impact Factor: 3.4546 (UIF)
DRJI Value : 5.9 (B+)
Article Details :
Article Name :
Determinants of Dividend Smoothing: Evidence from Pakistan
Author Name :
Zahid Ali, 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 non-financial 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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