Corporate dividend policy in practice: Evidence from an emerging market with a tax-free environment

Abdelaziz Chazi, Narjess Boubakri, Fernando Zanella

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)


    Several theories have been proposed to explain why companies pay dividends. However, as of today, the dividend policy remains a puzzle as no convincing explanation has been given as to why firms pay cash dividends to their shareholders. This paper contributes to this debate by examining the dividend policy in an emerging market that has a tax-free environment. Specifically, we follow Brav et al. (2005) and examine this issue using survey and field interviews, in the particular context of the United Arab Emirates. Our results provide support for the proposition that dividend policy is conservative. We also find that dividends in the UAE are considered by managers as a residual cash flow, and are determined after investment decisions are made. When examining the determinants of dividend policy, we find that taxes are not important, that institutional investors are expected to play a role in disciplining managers, and that dividends may play a disciplinary role as well in controlling agency conflicts.

    Original languageEnglish
    Pages (from-to)245-259
    Number of pages15
    JournalPacific Basin Finance Journal
    Issue number2
    Publication statusPublished - Apr 2011


    • Payout policy
    • Survey
    • UAE

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics


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