Open AccessDividend Changes and Future Profitability: Evidence from the Turkish Stock Market
Author(s) -
Eyüp Kadıoğlu,
Nurcan Ocal
Publication year - 2016
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v8n3p196
Subject(s) - profitability index , dividend , panel data , earnings , dividend policy , dividend yield , financial economics , turkish , monetary economics , business , stock market , economics , econometrics , finance , paleontology , linguistics , philosophy , horse , biology
Most of the previous studies on dividends in Turkey have focused on the effects of dividend announcements. There has been no study investigating the relation between dividend changes and the future profitability of firms. This study investigates this relation by using both ordinary and panel data regression on a data set consisting of 1,239 dividend payouts from 123 companies listed in Borsa Istanbul during the period 2004-2014. This study is unable to demonstrate that dividend changes are related to changes in future earnings. No evidence is found to support the dividend signaling theory, which claims that dividends serve as indicators of the future profitability of firms. On the other hand, future profitability is found to be strongly correlated with profitability in the previous year.