TY - JOUR
T1 - Corporate dividend policy in practice
T2 - Evidence from an emerging market with a tax-free environment
AU - Chazi, Abdelaziz
AU - Boubakri, Narjess
AU - Zanella, Fernando
PY - 2011/4/1
Y1 - 2011/4/1
N2 - 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.
AB - 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.
KW - Payout policy
KW - Survey
KW - UAE
UR - http://www.scopus.com/inward/record.url?scp=78650679758&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=78650679758&partnerID=8YFLogxK
U2 - 10.1016/j.pacfin.2010.11.001
DO - 10.1016/j.pacfin.2010.11.001
M3 - Article
AN - SCOPUS:78650679758
SN - 0927-538X
VL - 19
SP - 245
EP - 259
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
IS - 2
ER -