Stock liquidity and dividend policy: Evidence from an imputation tax environment

Truong-Giang Nguyen

International Review of Financial Analysis, 2020, vol. 72, issue C

Abstract: This paper investigates the impact of stock market liquidity on firms' dividend payout policy in the Australian market. The finding suggests that stock liquidity positively relates to firm dividend payouts. The result holds after controlling for different model estimations and different measures of stock liquidity/dividend. To address endogeneity issue, I use the removal of broker identities by the ASX in 2005 as an exogenous shock to stock liquidity. The result suggests that there is an increase in stock liquidity around this shock, leading to an increase in firm dividend, suggesting a causal effect of stock liquidity on firm dividend. I further document that stock liquidity enhances firm dividend through reducing cash-flow volatility and the effect of stock liquidity on firm dividend is weaker for firms reporting imputation tax credit.

Keywords: Dividend payout; Stock liquidity; Cash-flow volatility; Imputation tax (search for similar items in EconPapers)
JEL-codes: G14 G30 G35 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302039

DOI: 10.1016/j.irfa.2020.101559

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