Dividend policy : evidence from Turkey

The main aim of this doctoral thesis is to carry the dividend debate into an emerging market context, and contribute more evidence to dividend literature. This, however, is done different to prior research, by examining the dividend policy behaviour of an emerging market over a period of time, after implementing serious economic and structural reforms in order to integrate with world markets. Accordingly, therefore, attempting to uncover what behaviour the dividend policy of this emerging market shows. In particular, the dividend policies of the companies listed on the Istanbul Stock Exchange (ISE) are analysed. Turkey offers an ideal setting for studying dividend behaviour as a developing country, which implemented major reforms, starting with the fiscal year 2003 in compliance with the IMF stand-by agreement as well as adopting the EU directives and best-practice international standards for a better working of the market economy, outward-orientation and globalisation. Research results suggest that the ISE-listed firms follow the same firm-specific determinants of dividend policy as proposed by dividend theories, and as suggested by empirical studies conducted in developed markets following Turkey’s adoption of the International Financial Reporting Standards (IFRS) and inflation accounting, starting with the fiscal year 2003. Specifically, the primary firm-specific determinants of dividend policy are profitability, debt level, firm size, investment opportunities and firm age in the context of an emerging Turkish market. The findings of this thesis indicate that implementing major economic and structural reforms, adopting more flexible mandatory dividend policy regulations and attempting to prevent insider lending (non-arm’s length transactions) have led the ISE firms to adjust their cash dividends toward their target payout ratio by smoothing their dividends as suggested by Lintner (1956) and as exemplified by companies in developed markets. Hence, Turkish corporations have also been adopting stable dividend policies and using cash dividends as a signalling mechanism since 2003, with the implementation of severe economic and structural reforms. The main aim of this doctoral thesis is to carry the dividend debate into an emerging market context, and contribute more evidence to dividend literature. This, however, is done different to prior research, by examining the dividend policy behaviour of an emerging market over a period of time, after implementing serious economic and structural reforms in order to integrate with world markets. Accordingly, therefore, attempting to uncover what behaviour the dividend policy of this emerging market shows. In particular, the dividend policies of the companies listed on the Istanbul Stock Exchange (ISE) are analysed. Turkey offers an ideal setting for studying dividend behaviour as a developing country, which implemented major reforms, starting with the fiscal year 2003 in compliance with the IMF stand-by agreement as well as adopting the EU directives and best-practice international standards for a better working of the market economy, outward-orientation and globalisation. Research results suggest that the ISE-listed firms follow the same firm-specific determinants of dividend policy as proposed by dividend theories, and as suggested by empirical studies conducted in developed markets following Turkey’s adoption of the International Financial Reporting Standards (IFRS) and inflation accounting, starting with the fiscal year 2003. Specifically, the primary firm-specific determinants of dividend policy are profitability, debt level, firm size, investment opportunities and firm age in the context of an emerging Turkish market. The findings of this thesis indicate that implementing major economic and structural reforms, adopting more flexible mandatory dividend policy regulations and attempting to prevent insider lending (non-arm’s length transactions) have led the ISE firms to adjust their cash dividends toward their target payout ratio by smoothing their dividends as suggested by Lintner (1956) and as exemplified by companies in developed markets. Hence, Turkish corporations have also been adopting stable dividend policies and using cash dividends as a signalling mechanism since 2003, with the implementation of severe economic and structural reforms. Research evidence reveals that the ISE-listed firms have highly concentrated ownership structures; mostly owned by families followed by foreign investors, whereas other blockholders such as domestic financial institutions and the state, show relatively lower shareholdings. Moreover, evidence implies that the implementation of various major economic and structural reforms in cooperation with the IMF and the EU directives and best-practice international standards, which include the publication of the Capital Market Board (CMB) of Turkey’s Corporate Governance Principles in line with the World Bank and the OECD, starting with the fiscal year 2003, have resulted in significant improvements for the ISE-listed firms corporate governance, transparency and disclosure practices and better shareholder protection. Investors, in general, therefore, have preference for the potential long-run growth opportunity for the stocks they hold in the ISE, since Turkey is a fast-growing market, rather than requiring cash dividends as a monitoring mechanism or to control agency problems. This thesis extends empirical research on dividend policy into an emerging market, which not only passed laws for financial liberalisation, but implemented serious reforms to integrate with world markets by using a large panel dataset from Turkey. Although the implementation of major reforms and regulatory changes may produce different results in different emerging markets, it is believed that this thesis can be a valuable benchmark for further longitudinal and cross-country research on this respect of the dividend puzzle

Dividend policy : evidence from Turkey

The main aim of this doctoral thesis is to carry the dividend debate into an emerging market context, and contribute more evidence to dividend literature. This, however, is done different to prior research, by examining the dividend policy behaviour of an emerging market over a period of time, after implementing serious economic and structural reforms in order to integrate with world markets. Accordingly, therefore, attempting to uncover what behaviour the dividend policy of this emerging market shows. In particular, the dividend policies of the companies listed on the Istanbul Stock Exchange (ISE) are analysed. Turkey offers an ideal setting for studying dividend behaviour as a developing country, which implemented major reforms, starting with the fiscal year 2003 in compliance with the IMF stand-by agreement as well as adopting the EU directives and best-practice international standards for a better working of the market economy, outward-orientation and globalisation. Research results suggest that the ISE-listed firms follow the same firm-specific determinants of dividend policy as proposed by dividend theories, and as suggested by empirical studies conducted in developed markets following Turkey’s adoption of the International Financial Reporting Standards (IFRS) and inflation accounting, starting with the fiscal year 2003. Specifically, the primary firm-specific determinants of dividend policy are profitability, debt level, firm size, investment opportunities and firm age in the context of an emerging Turkish market. The findings of this thesis indicate that implementing major economic and structural reforms, adopting more flexible mandatory dividend policy regulations and attempting to prevent insider lending (non-arm’s length transactions) have led the ISE firms to adjust their cash dividends toward their target payout ratio by smoothing their dividends as suggested by Lintner (1956) and as exemplified by companies in developed markets. Hence, Turkish corporations have also been adopting stable dividend policies and using cash dividends as a signalling mechanism since 2003, with the implementation of severe economic and structural reforms. The main aim of this doctoral thesis is to carry the dividend debate into an emerging market context, and contribute more evidence to dividend literature. This, however, is done different to prior research, by examining the dividend policy behaviour of an emerging market over a period of time, after implementing serious economic and structural reforms in order to integrate with world markets. Accordingly, therefore, attempting to uncover what behaviour the dividend policy of this emerging market shows. In particular, the dividend policies of the companies listed on the Istanbul Stock Exchange (ISE) are analysed. Turkey offers an ideal setting for studying dividend behaviour as a developing country, which implemented major reforms, starting with the fiscal year 2003 in compliance with the IMF stand-by agreement as well as adopting the EU directives and best-practice international standards for a better working of the market economy, outward-orientation and globalisation. Research results suggest that the ISE-listed firms follow the same firm-specific determinants of dividend policy as proposed by dividend theories, and as suggested by empirical studies conducted in developed markets following Turkey’s adoption of the International Financial Reporting Standards (IFRS) and inflation accounting, starting with the fiscal year 2003. Specifically, the primary firm-specific determinants of dividend policy are profitability, debt level, firm size, investment opportunities and firm age in the context of an emerging Turkish market. The findings of this thesis indicate that implementing major economic and structural reforms, adopting more flexible mandatory dividend policy regulations and attempting to prevent insider lending (non-arm’s length transactions) have led the ISE firms to adjust their cash dividends toward their target payout ratio by smoothing their dividends as suggested by Lintner (1956) and as exemplified by companies in developed markets. Hence, Turkish corporations have also been adopting stable dividend policies and using cash dividends as a signalling mechanism since 2003, with the implementation of severe economic and structural reforms. Research evidence reveals that the ISE-listed firms have highly concentrated ownership structures; mostly owned by families followed by foreign investors, whereas other blockholders such as domestic financial institutions and the state, show relatively lower shareholdings. Moreover, evidence implies that the implementation of various major economic and structural reforms in cooperation with the IMF and the EU directives and best-practice international standards, which include the publication of the Capital Market Board (CMB) of Turkey’s Corporate Governance Principles in line with the World Bank and the OECD, starting with the fiscal year 2003, have resulted in significant improvements for the ISE-listed firms corporate governance, transparency and disclosure practices and better shareholder protection. Investors, in general, therefore, have preference for the potential long-run growth opportunity for the stocks they hold in the ISE, since Turkey is a fast-growing market, rather than requiring cash dividends as a monitoring mechanism or to control agency problems. This thesis extends empirical research on dividend policy into an emerging market, which not only passed laws for financial liberalisation, but implemented serious reforms to integrate with world markets by using a large panel dataset from Turkey. Although the implementation of major reforms and regulatory changes may produce different results in different emerging markets, it is believed that this thesis can be a valuable benchmark for further longitudinal and cross-country research on this respect of the dividend puzzle

Impact of governance structures on environmental disclosures in the Middle East and Africa

Purpose – This study investigates the impact of corporate governance structures on environmental disclosure practices in the Middle East and Africa. Design/methodology/approach – The research model uses a panel dataset of 121 publicly listed (non-financial and non-utility) firms from 11 Middle East and African (MEA) countries over the period 2010–2017, employs alternative dependent variables and regression techniques, and is applied to various sub-groups to improve robustness. Findings – The empirical results strongly indicate that MEA firms with high governance disclosures tend to have better environmental disclosure practices. The board characteristics of gender diversity, size, CEO/chairperson duality and audit committee size impact positively on MEA firms’ voluntary environmental disclosures, whereas board independence has a negative influence. Research limitations/implications – This study advances research on the relationship between corporate governance structures and environmental disclosure practices in MEA countries, but is limited to firms for which data are available from Bloomberg. Practical implications – The results have important practical implications for MEA policymakers and regulators. Given the positive impact of board gender diversity on firms’ environmental disclosures, policy reforms should aim to increase female directors. MEA corporations aiming to be more environmentally friendly should recruit females to top managerial positions. Originality value – This is thought to be the first study to provide insights from the efficiency and legitimation perspectives of neo-institutional theory to explain the relationship between MEA firms’ internal governance structures and environmental disclosures

Revisiting Firm-Specific Determinants of Dividend Policy: Evidence from Turkey

This study investigates the effects of firm-specific factors on dividend policies of Turkish publicly listed firms in the post-2003 period. The paper focuses on this period, because Turkish authorities and regulators implemented various major economic and structural reforms for market integration and made significant changes in the regulatory framework of cash dividend policy rules starting with the fiscal year 2003. We analyse a panel dataset of 264 firms traded in the Istanbul Stock Exchange (ISE) over the period 2003-2012 and our results reveal that profitability, debt, growth, firm age and firm size are the most important firm-specific characteristics determining cash dividend payment decisions of ISE-listed firms. The findings, thus, suggest that more profitable, more mature and larger size firms are more likely to pay dividends (and distribute higher dividends), whereas firms with higher growth (investment opportunities) and more debt are less likely to pay dividends (and distribute lower dividends) in the Turkish market. Overall, we detect that the firm-specific determinants that affect corporate dividend policies of ISE firms do follow similar patterns of dividend policy factors in more developed economies after the implementation of major developments in the post-2003 period, and hence such reforms make Turkish firms to be comparable to their counterparts in developed markets in terms of dividend policy setting process

Demystifying the ‘dividend puzzle’ and making sense of government regulations in times of pandemics

In the early days of 2020, when measures to contain the coronavirus pandemic hurt economies worldwide, many publicly listed firms omitted or suspended their dividend payments. For investors across the world, who seek for or solely rely on dividend income, this situation caused great difficulty. By the end of 2021, dividends had bounced back. Globally, 90 per cent of companies either increased their dividends or maintained them steady. Erhan Kilincarslan analyses key developments affecting dividend policies

Institutional investment horizon and dividend policy: An empirical study of UK firms

This paper investigates the effect of the institutional investment horizon on dividend policy. Using a panel dataset of non-financial UK firms over the period 2000‒2010, we measure institutional investors’ investment horizons by the churn rate of their overall stock positions in a firm. We find that there is a significantly negative relationship between the churn rate and dividend payments, and this negative relation is robust to the usage of different dividend policy proxies, substitute methodologies and alternative churn rate measures. Thus, our findings suggest that institutions with shorter term investment horizons (with higher churn rates) have a negative impact on dividends, whereas longer term institutional investors (with lower churn rates) have a positive one. Overall, our evidence is consistent with the notion that long-horizon institutions are more concerned with monitoring, compared to short-horizon institutions, and prefer higher dividends to increase dividend-induced capital market monitoring in order to lower the agency costs of managerial discretion. In addition, this positive influence may also reflect the preferences of tax-neutral long-horizon institutions for dividend income due to their liquidity needs, as well as the common institutional charter and prudent-man rule restrictions