What drives the dividend policy of Taiwan firms?
Date Issued
2008
Date
2008
Author(s)
Chou, Chia-Hui
Abstract
Dividend policy does not matter to the investor in a perfect financial market as they can create homemade dividends from the market. But a lot of researches provide reasonable and convincing logic to explain why firms pay out cash dividends in the real world. So, it is interesting to find out the determinants of the cash dividend behind. The subject of this study is an empirical investigation of the determining factors of dividend policy.his study uses financial data of Taiwan listed firms from 2001 through 2006 to examine the motives behind firms for paying out cash dividends. Five hypotheses, including cash flow hypothesis, maturity hypothesis, cash channeling hypothesis and relationship between cash dividend and transaction costs and profitability, are tested in this study. The empirical results support the free cash flow hypothesis and cash channeling hypothesis. The results also indicate that cash dividend payment behaviors of the Taiwan firms are related to transaction costs and largely consistent with earning ability. But there is no evidence showing firms pay out cash dividends to stockholders when the investment opportunities of the firms decline, thus rejecting the maturity hypothesis.
Subjects
dividend
Type
thesis
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