The Impact of Dividend Policy on Shareholder Value: A Test of the Life Cycle Hypothesis

• Main Authors: Yu-HsienWu, 吳昱賢
• Other Authors: Tse-Shih Wang
• Format: Others
• Language: en_US
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/kx9hpx

碩士 === 國立成功大學 === 財務金融研究所 === 105 === The firm life cycle theory of dividend implies that the growth firm should pay low dividends, the mature firm should pay medium dividends and the decline firm should pay high dividends because of the different cash flows, profitability and investment opportunities. I examine whether the firm dividend policy in line with the theory creates more value for the shareholder. I construct nine portfolios by different dividend payout levels and firm life cycle stages based on Dickinson’s method and compare the mean abnormal returns among three portfolios with dissimilar payout levels in the growth, mature and decline stage. According to the typology developed by Dickinson (2011), the results do not support my hypotheses and show the firms with high dividend payment generate more abnormal returns irrespective of the firm life cycle stages. The dividend signaling theory can’t explain the consequences but institutional holdings preference provide evidence for the significant outcomes as inference. The interpretations suggest that the large stockholders’ favors have substantial impact on the abnormal returns, a proxy for shareholder value, despite the firm dividend policy consistent with the firm life cycle theory of dividend based on Dickinson’s method.