Dividends as a signalling mechanism: the case of illiquid stock markets

González, Maximiliano; Zamudio, Luis Eudoro Vallejo

doi:10.1093/imaman/dpl011

Cited by 3 publications

(2 citation statements)

References 15 publications

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“…Finally, the results indicate that stock market liquidity is negatively correlated with dividend payment, which is in accordance with Gonzalez's (2003) theoretical model. In fact, the introduction of an electronic quotation system in the TSE improved liquidity and thus facilitated capital gains that replaced somewhat dividend payments.…”

Section: Resultssupporting

confidence: 86%

“…We measure the liquidity of a stock market by the annual value of stock traded over its market capitalization (TURN). Gonzalez (2003) suggests in a theoretical model that managers acting in favor of shareholders will increase the level of payment of dividends in situations of liquidity shocks, as the discount costs become high. Supposing that in emerging markets liquidity shocks are more probable than in developed markets, we test whether the relation between the companies' payment of dividends and the liquidity of the market is negative in Tunisia.…”

Section: Conceptual Framework and Working Hypothesesmentioning

confidence: 99%

See 1 more Smart Citation

On the Determinants and Dynamics of Dividend Policy

Naceur¹,

Goaïed²,

Belanes

2006

Int Rev Finance

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The authors study the dividend policy of 48 firms listed on the Tunisian Stock Exchange during the period 1996-2002. The study tests whether or not managers of Tunisian listed firms smooth their dividends. Moreover, the study outlines the main determinants that may drive the dividend policy of Tunisian quoted firms. To answer the first question, we use Lintner's model in a dynamic setting. The results clearly demonstrate that Tunisian firms rely on both current earnings and past dividends to fix their dividend payment. However, the study shows that dividends tend to be more sensitive to current earnings than prior dividends. To find out the determinants of dividend policy, dynamic panel regressions have been performed. First, profitable firms with more stable earnings can afford larger free cash flows and thus pay larger dividends. Furthermore, they distribute larger dividends whenever they are growing fast. However, neither the ownership concentration nor the financial leverage seems to have any impact on dividend policy in Tunisia. Also, the liquidity of stock market and size negatively impacts the dividend payment. The results are somewhat robust to different specifications. Copyright (c) International Review of Finance Ltd. 2007.

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Section: Resultssupporting

confidence: 86%

Section: Conceptual Framework and Working Hypothesesmentioning

confidence: 99%