A study on the effect of free cash flow and profitability current ratio on dividend payout ratio: Evidence from Tehran Stock Exchange

Parsian, H.; Koloukhi, A.

Growing Science » Management Science Letters » A study on the effect of free cash flow and profitability current ratio on dividend payout ratio: Evidence from Tehran Stock Exchange

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Management Science Letters

ISSN 1923-9343 (Online) - ISSN 1923-9335 (Print) Quarterly Publication Volume 4 Issue 1 pp. 63-70 , 2014

A study on the effect of free cash flow and profitability current ratio on dividend payout ratio: Evidence from Tehran Stock Exchange Pages 63-70 Download PDF

Authors: Hosein Parsian, Amir Shams Koloukhi

DOI: 10.5267/j.msl.2013.11.033

Keywords: Dividend payout ratio, Free cash flow, Leverage ratio, Profitability current ratio, Tehran Stock Exchange

Abstract: Decision making about dividend payout is one of the most important decision that companies should encounter. Identifying factors that influence dividends can help managers in making an appropriate dividend policy. In the other side, companies’ dividend payouts over time and with a stable manner may influence on stock price, future earnings growth and finally investor & apos; s evaluation about owners & apos; equity. Hence, investigating the factors influencing dividend payout ratio is of high importance. In this research, we investigate the effects of various factors on dividend payout ratio of Tehran Stock Exchange (TSE) listed companies. We use time series regression (panel data) in order to test the hypothesis of this study. This study provides empirical evidences by choosing a sample of 102 companies over the time span of 2005-2010. The result shows that independent variables of free cash flow and profitability current ratio have negative and significant impact on dividend payout ratio; whereas, the independent variable of leverage ratio has a positive and significant impact on dividend payout ratio. The other independent ratio such as size of the company, growth opportunities and systematic risk do not have any significant influence on dividend payout ratio.

How to cite this paper

 Parsian, H & Koloukhi, A. (2014). A study on the effect of free cash flow and profitability current ratio on dividend payout ratio: Evidence from Tehran Stock Exchange.Management Science Letters , 4(1), 63-70.

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