Corporate Dividend Policy Determinants: Intelligent Versus a Traditional Approach

Abstract

SUMMARY Dividend is the return that an investor receives when purchasing a company's shares. The decision to pay these dividends to shareholders concerns several other groups of people, such as financial managers, consulting firms, individual and institutional investors, government and monitoring authorities, and creditors, just to name a few. The prediction and modelling of this decision has received a significant amount of attention in the corporate finance literature. However, the methods used to study the aforementioned question are limited to the logistic regression method without any implementation of the advanced and expert methods of data mining. These methods have proven their superiority in other business‐related fields, such as marketing, production, accounting and auditing. In finance, bankruptcy prediction has the vast majority among data‐mining implementations, but to the best of the authors’ knowledge such an implementation does not exist in dividend payment prediction. This paper satisfies this gap in the literature and provides answers that help to understand the so‐called ‘dividend puzzle’. Specifically, this paper provides evidence supporting the hypothesis that data‐mining methods perform better in accuracy measures against the traditional methods used. The prediction of dividend policy determinants provides valuable benefits to all related parties, as they can manage, invest, consult and monitor the dividend policy in a more effective way. Copyright © 2013 John Wiley & Sons, Ltd.

Firm's Dividend Decision i̇n Indonesia: Cater or Mature?

“…The other results show the life cycle theory can be applied where firms as dividend payers relative to firms as non dividend payers are firms in mature phase because they have higher retained earnings over their equities (DeAngelo, DeAngelo, and Stulz, 2006;Fairchild, Guney, and Thanatawee, 2014), and more profitable (Fama and French, 2001;Fama and French, 2002;DeAngelo, DeAngelo, and Stulz, 2006;Longinidis and Symeonidis, 2013). The other insignificant variables also support the results which is consistent with Grullon, Michaely, and Swaminathan (2002).…”

“…The positive significant effect by share price shows firms as dividend payers relative to firms as non dividend payers have strong tendency to follow catering theory as proposed by Wurgler (2004a, 2004b), Li and Lie (2006), and Pontoh (2015). The results also imply in general condition, firms as dividend payers relative to firms as non dividend payers with age below 33 years are seems in mature phase for their business because they have abundant retained earnings (DeAngelo, DeAngelo, and Stulz, 2006;Fairchild, Guney, and Thanatawee, 2014), more profitable (Fama and French, 2001;Fama and French, 2002;DeAngelo, DeAngelo, and Stulz, 2006;Longinidis and Symeonidis, 2013), and larger size (Grullon, Michaely, and Swaminathan, 2002;DeAngelo, DeAngelo, and Stulz, 2006). But since debt has negative effect to dividends which is consistent with Acharya, Almeida, and Campello (2007) and Strebulaev and Yang (2013), then these firms cannot be said in mature phase at full because since the consequence of debt is interest expense then the profit for these firms are reduced make them have tendency to decrease their dividends.…”

Trust Value of a Dividend : An Evidence From Indonesia

“…Profitability. Fama and Babiak (1968), Fama and French (2002), and also Longinidis and Symeonidis (2013), notifed that there is a strong relationship between profit and dividend because profitable firms pay out more of their earnings as dividends. From this point, the working of Aharony and Swary (1980) as well as of Kane, Lee, and Marcus (1984), about the information of firm's future prospects related to announcement of dividend and earnings was reviewed By these facts, earnings per share were determined as indicator for profitability measured by net income divided by shares outstanding.…”

Determinants of Corporate Dividend Policy in Polish Companies Listed on WSE

“…The primary goal of a company's financial management is to maximize the current value per share of the existing stock. One substantial financial decision affecting this value maximization goal is the dividend policy (Longinidis & Symeonidis, 2013;Kouser, et al 2015). It has attracted scholars' attention since the 1950s while for financial economists it remains the most debated puzzle (Jabbouri, 2016;Guttman et al, 2008).…”