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Regulation Influence on the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations

Cahit Adaoglu

Istanbul Stock Exchange Review, 1999, vol. 3, issue 11, 1-20

Abstract: In this study, the regulation influence on the dividend policy of the ISE corporations is analyzed qualitatively and quantitatively. In 1995, there has been a significant change in the dividend regulations granting extensive flexibility in the dividend policy decision making for the corporations that are traded in the ISE. The empirical results show that for the period before the 1995 regulatory change, there are no industrial differences in the cash dividend policy due to the regulations that left little room for managers in determining their cash dividend policies. However, significant industrial differences in the cash dividend policy exist for the period after the 1995 regulatory change. Moreover, there is a substantial decrease in the median cash dividend payout ratios and ISE corporations tended to use the resources for internal financing. Additionally, ISE corporations collect back the distributed cash dividends through simultaneous rights issues for new equity. The repeated test results using net dividend payouts are similar to the results of cash dividend payouts.

Date: 1999
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