The Relationship between Cash Flow Uncertainty and Payout Dividend Policy

Abstract

Aims: The determinant of dividend policy is one of the biggest challenges that has long been the center of accounting and financial researcher and theoreticians’ attention. In this study, four effects, namely, cash-flow uncertainty, earned/contributed capital mix, agency conflict and investment opportunities in payout dividend policy are simultaneously investigated in Tehran exchange stock. Study Design: Many factors are proved to have an essential impact on the dividend policy; nevertheless, there are a lot of other potential factors, the effect thereof on the dividend policy has not been studied yet. Place and Duration of study: The sample firms consisting of 140 TSE firms were studied in a 5-year period within 2007-2011. Methodology: The method of this research is applied science based on the observations in order to find the correlation and relation between the parameters. The hypotheses of this study include 4 above parameters which have been tested according to the panel and consolidated regression. In this study, the simultaneous effects of four factors including cash-flow uncertainty, earned/contributed capital mix, agency conflict and investment opportunities on the payout dividend policy are investigated. Results: The findings of the study indicated that in these two foregoing tests, no evidences supporting the effect of cash flow uncertainty on the payout dividend policy were found and earned/contributed capital mix and estimation of investment opportunities have positive and significant effects on dividend payout. In addition, the summary of two regression tests implies the inverse and significant effect of agency conflict on the dividend payout. Conclusion: The results of this research are useful for companies in decision making procedure, specifically when it comes to payout dividend.