Dividend Policies in Volatile Transitioning Markets

Dodig Ante and Dzidic Ante
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Dodig Ante: Investment Officer at International Finance Corporation, Washington D.C., USA.
Dzidic Ante: Expert Assistant at Indirect Taxation Authority of Bosnia and Herzegovina; and Assistant Professor at Faculty of Economics, University of Mostar, Mostar, Bosnia and Herzegovina.

Zagreb International Review of Economics and Business, 2022, vol. 25, issue 1, 111-132

Abstract: This paper examines the implicit impact of an individual company financial parameters on dividends payments. The empirical research is conducted within the environment that cross-examines fifteen European transition economies with shared traits of frontier to emerging capital markets development stage and exposure to exogenic global volatility from 2007/8 and Covid-19 economic crises spilling over at magnitude. The purpose of this paper is to test whether companies establish stable dividend policy. Dividends payments are sensitive to earnings and hence adjust imminently. The reason stems from uncertainty on future financial performance and on investor protection. Results yield negative link between solvency and dividends based on the fact that the weaker solvency position decreases the priority of dividends likelihood. Comparably dividends are less desirable if competing with company growth opportunities although investors are less willing to wait for future profits. Altogether transitioning markets are less responsive and structurally feature fewer corporate events.

Keywords: Dividend policy; Lintner model; Market volatility; Emerging markets; Capital markets (search for similar items in EconPapers)
JEL-codes: C33 D22 G35 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:zirebs:v:25:y:2022:i:1:p:111-132:n:1007

DOI: 10.2478/zireb-2022-0008

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