engleski

Applicability of the firm life cycle theory of dividends on Croatian capital market

There is a large number of determinants that affect the decision about dividends. The purpose of this paper is to investigate the influence of determinates that can be assigned to the firm life cycle theory of dividends on company dividend decision on Croatian stock market. The firm life cycle theory of dividends is based on the notion that as a firm matures, its ability to generate cash overtakes its ability to find profitable investment opportunities. Eventually, the optimal choice for the firm is to distribute its free cash flow to shareholders. Linear panel model with random-effects and discriminant analysis is used to investigate applicability of the firm life cycle theory of dividends. Linear panel model is used to identify the determinants of the firm life cycle theory of dividends that are statistically significant and can be applicable on Croatian companies. Results are mixed. Investment possibilities have significant positive effect on dividends which is opposite to the firm life cycle theory of dividends, and the ratio of retained earnings to total equity has a significant positive effect on dividend decisions, which is in contrast to firm life cycle theory of dividends. Discriminant analysis showed that companies that pay and don’t pay dividends are significantly different in four of six variables which can be assigned to the firm life cycle theory of dividend.

dividends, stock market, firm life cycle theory of dividends

nije evidentirano