Payout Policy: An Empirical Test of the Catering Theory of Dividend in Tehran Stock Exchange (TSE)

Document Type : Research Paper

Authors

islamic azad university of tehran

Abstract

Catering theory of dividend is based on the principle that managers balance dividend policy with investors’ varying demand for cash dividend. In this paper, catering theory of dividend in Tehran Stock Exchange (TSE) was tested with market-level and firm-level variables for 420 observation (7 years, 60 firms) during the period (2007-2013) running binary logistic regression. The findings of the study showed that investors` demand for pay or not to pay dividends and for increase or decrease of dividends has positive and significant effect on managers` decision regarding dividend policy. These findings are in line with the behavioral corporate finance flow that regards managers` performance as rational responses to the irrational investors’ behavior.

Keywords

References

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History

  • Receive Date: 06 June 2015
  • Revise Date: 04 October 2015
  • Accept Date: 12 September 2015

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