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Abstract
The objective of this study is to enrich the literature by investigating the effects of dividend policies on the value of listed companies in Vietnam. Data used in this study consists of262 listed companies in Ho Chi Minh Stock Exchange (HOSE) for the period from 2016 to 2018. Using the fixed effects model (FEM), the empirical findings confirm the dividend payout ratio has a positive relationship with the value of the listed companies. This finding supports the bird-in-hand theory that investors prefer to receive dividends in cash rather than capital gains in the future. In addition, this study finds that dividend payment methods significantly affect the value of listed companies. In fact, the cash dividend positively affects the value of the listed companies. This evidence is consistent with the signaling theory that payment for dividends in cash is a good signal from the companies.
Keywords: Dividendpolicies, value of listed companies, bird-in-hand theory, transitional economies.
1. Introduction
Dividend policy is the practice of making dividend payout decisions in terms of the size and pattern of cash distribution over time to shareholders by the management team (Al-Malkawi et al., 2010). The dividend policy is one of the most important financial policies of the company. Dividends are considered a reward for shareholders for their investments and the risk they incur when holding company stocks (Kim et al., 2021). Dividends are also considered a means of monitoring business performance because, through their ownership ratio, investors can request the company to implement different dividend policies, thereby changing the level of agency conflict (Farrukh et al., 2017).
The dividend policy applied in companies listed on stock exchanges is very diversified and flexible. The company could choose a reasonable dividend payment form depending on the period. Well-performing companies make more profits, shareholders benefit when they receive more dividends, and thus, it is easier for companies to raise capital. However, the dividend payment also reduces the company's retained earnings, making it difficult to expand investment in projects. Dividends could be paid in cash or in the form of stocks. Some other forms of dividends could include the company's products or securities of another company that the company owns. Since the release of the dividend irrelevance theory by Miller and Modigliani (1961),...