Dividend Policies and Business Groups: the Case of Croatia

Martina Sopta Mihaela Mikić Tin Horvatinović
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Martina Sopta Mihaela Mikić Tin Horvatinović: University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia. University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia. University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia.

Zagreb International Review of Economics and Business, 2019, vol. 22, issue SCI, 25-36

Abstract: There are two competing hypothesizes on whether firms that are part of a business group should pay higher or lower dividends. Under one hypothesis, that can have different theoretical assumptions, firms that are a part of a business group should pay higher dividends. In contrast, if the pecking order hypothesis holds, firms that operate within a business group should pay lower dividends. The purpose of this paper is to examine the effect of group affiliation of Croatian firms, which are listed on the Zagreb Stock Exchange, on their propensity to pay dividends. Two panel data models were used in line with recent literature and the results of the study show some evidence that the pecking order theory was followed by Croatian firms. From this result the conclusion is that Croatian firms are more likely to pay dividends if they are not part of a business group. JEL Classification: G30, G35, L26

Keywords: Business Group; Dividend Policy; Internal Capital Market; Pecking Order Theory (search for similar items in EconPapers)
Date: 2019
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