Dividend stability in a unique environment

Khamis Hamed Al-Yahyaee, Toan Pham, Terry Walter

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

Purpose – This paper aims to examine the stability of dividend policy using a unique data set. Design/methodology/approach – The paper is based on the Lintner model that is used to test the dividend smoothing behavior. The specific econometric method used for panel data is Tobit regression. Findings – The evidence shows that Omani firms adopt a policy of smoothing dividends. This stability of dividends does not support the predictions suggested by the high bank leverage, absence of taxes, and the variability of dividend payments in Oman. Research limitations/implications – This study highlights the need for further research in order to examine whether these results have any effect on dividend initiations and omissions in Oman. Practical implications – The findings of this study show that there are differences in dividend policies between the Omani companies and those in developed markets. Potential investors in the Omani market should be aware about these differences in making their investment decisions. Originality/value – This paper examines stability of dividend policy in a unique environment where firms distribute almost 100 percent of their profits in dividends, firms are highly levered mainly through bank loans, there are no taxes on dividends and capital gains, and there is variability in cash dividend payments. These factors suggest a diminished role of dividend stability in Oman. It is an empirical issue to examine whether this is indeed true. The authors are not aware of any other study on dividend stability using data with these unique factors.

Original languageEnglish
Pages (from-to)903-916
Number of pages14
JournalManagerial Finance
Volume36
Issue number10
DOIs
Publication statusPublished - Aug 31 2010

Fingerprint

Dividends
Dividend policy
Oman
Dividend smoothing
Factors
Payment
Tax
Dividend omission
Investment decision-making
Prediction
Investors
Econometric methods
Bank loans
Profit
Panel data
Capital gains
Tobit regression
Cash dividends
Leverage
Dividend initiation

Keywords

  • Dividends
  • Financial economics
  • Oman
  • Taxes

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

Cite this

Dividend stability in a unique environment. / Hamed Al-Yahyaee, Khamis; Pham, Toan; Walter, Terry.

In: Managerial Finance, Vol. 36, No. 10, 31.08.2010, p. 903-916.

Research output: Contribution to journalArticle

Hamed Al-Yahyaee, Khamis ; Pham, Toan ; Walter, Terry. / Dividend stability in a unique environment. In: Managerial Finance. 2010 ; Vol. 36, No. 10. pp. 903-916.
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