Why Do Companies Pay Dividends?: A Comment

Dewasiri, N. J., Weerakoon Banda.Y.K., Why Do Companies Pay Dividends? : A Comment, Journal of Corporate Ownership and Control, Vol. 13, No. 02, pp. 443-453

11 Pages Posted: 6 Dec 2015 Last revised: 12 Apr 2017

See all articles by N. J. Dewasiri

N. J. Dewasiri

University of Colombo; University of Colombo, Students

Weerakoon Banda Yatiwella

University of Sri Jayewardenepura

Multiple version iconThere are 2 versions of this paper

Date Written: December 7, 2016

Abstract

This study reviews one of the unresolved research puzzles in corporate finance; why do companies pay dividends? In this context, a qualitative study dealing with content analysis is carried out-based on the theoretical and empirical research. After critically reviewing 407 research articles in dividend policy, 50 empirical studies were taken as the sample based on the relevancy to the research puzzle.

The content analysis has provided some significant insights and stylized facts with regard to the corporate dividend policy. However the previous research studies were fundamentally flawed in their design based on quantitative approaches in order to elucidate a behavioural explanation. As a result, most of the study findings cannot be relied upon to see consistency with the theories in question. Despite years of theoretical and empirical evidences, the findings show that the dividend puzzle is still remaining as unresolved research phenomenon in corporate finance due to lack of unanimity among the researchers over the explanations. This study provides the reader an all-embracing understanding on the theories and empirical explanations over the dividend puzzle. It is imperative for the researchers to focus on all empirical and theoretical explanations in a single study and test them simultaneously in a triangular approach in order to have a single consensus over this puzzle. Thus, developing a new paradigm or models to deal with the dividend puzzle is suggested, until then the deduction of various theories in different studies are inconclusive and inconsistent.

Keywords: Corporate dividend policy, dividend puzzle, triangular approach

JEL Classification: G30, G32, G35

Suggested Citation

Dewasiri, N. J. and Yatiwella, Weerakoon Banda, Why Do Companies Pay Dividends?: A Comment (December 7, 2016). Dewasiri, N. J., Weerakoon Banda.Y.K., Why Do Companies Pay Dividends? : A Comment, Journal of Corporate Ownership and Control, Vol. 13, No. 02, pp. 443-453 , Available at SSRN: https://ssrn.com/abstract=2699666 or http://dx.doi.org/10.2139/ssrn.2699666

N. J. Dewasiri (Contact Author)

University of Colombo ( email )

Reid Avenue
Colombo 3, Western 0094
Sri Lanka

University of Colombo, Students ( email )

Western
Sri Lanka

Weerakoon Banda Yatiwella

University of Sri Jayewardenepura ( email )

Nugegoda
Gandodawila
Gangodawila, Nugegoda 10250
Sri Lanka

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