Open AccessLife-Cycle Theory and Free Cash Flow Hypothesis: Evidence from Dividend Policy in Thailand
Author(s) -
Yordying Thanatawee
Publication year - 2011
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v2n2p52
Subject(s) - free cash flow , dividend policy , dividend payout ratio , dividend , dividend yield , monetary economics , cash flow , leverage (statistics) , retained earnings , earnings , equity (law) , earnings growth , economics , debt , financial economics , business , finance , machine learning , computer science , political science , law
This paper examines dividend policy of Thai listed companies over the period 2002-2008. The results show that larger and more profitable firms with higher free cash flows and retained earnings to equity tend to pay higher dividends. In addition, the evidence indicates that firms with higher growth opportunities, proxied by market-to-book ratio, tend to pay lower dividend payout ratio but higher dividend yield. Collectively, the findings from this paper provide much support for the free cash flow and life-cycle hypotheses. Further, it is found that financial leverage is positively related to dividend payouts, a finding which casts doubt whether Thai firms rely on debt to pay dividends.