Determinants of dividend policy the case of Vietnam

International Journal of Business, Economics and Law, Vol. 1
ISSN 2289-1552

2012

DETERMINANTS OF DIVIDEND POLICY: THE CASE OF VIETNAM
Nguyen Thi Xuan Trang
Accounting Department
Da Nang University of Economics
71 Ngu Hanh Son Street, Ngu Hanh Son District, Da Nang City, Vietnam
Email: [e-mail] , Tel: [phone]

ABSTRACT
There were several researchers who investigated dividend policy in developed countries like the USA (Chang and Rhee, 1990), the UK (Al-Najjar and Hussainey, 2009), Argentina (Bebczuk, 2005), Poland (Kowalewski et al., 2008) or Japan (Ho, 2003) and some authors studying this in developing countries such as Tunisia (Naceur et al., 2006) or Pakistan (Mehar, 2002) with widely different results but no researches have been done in Viet Nam about the determinants of its dividend policy. Therefore the purpose of this paper is to examine the determinants of dividend policy in Viet Nam, an emerging stock market that was officially established in July, 2000. The paper identifies whether firms’ characteristics and corporate governance affect their dividend payments. Firms’ characteristics include profitability, firm size, debt level, liquidity, asset structure, industry type, growth opportunities plus business risk; corporate governance comprises management ownership, ownership concentration, board of directors along with audit quality. The author relies on a sample of 116 companies listed on the Hochiminh Stock Exchange
(HOSE) and Hanoi Stock Exchange (HNX) for the year of 2009 in Viet Nam. Being similar to studies in the US, the UK,
Argentina, Tunisia and Poland, it is found that, in Vietnam, profitability influences positively and business risk impacts negatively on dividend disbursement. Moreover, there are relationships between industry type as well as audit quality and dividend payments. This research contributes to Vietnamese literature in asserting that profitability is the most important determinant of

References: Aivazian, V., Booth, l. and Cleary, S. (2003a). Do emerging market firms follow different dividend policies from US firms?. Allen, F., Antonio, B. and Ivo, W. (2000). A theory of dividends based on tax clientele. Journal of Finance, Vol. 55 No. 6, pp. Al-Najjar, B. and Hussainey, K. (2009). The association between dividend payout and outside directorships. Journal of Applied Accounting Research, Vol Baker, H.K., Farrelly G.E. and Edelman R.B. (1985). A Survey of Management Views on Dividend Policy. Financial Management, Vol Baker, H.K. and Powell G.E. (2000). Determinants of corporate dividend policy: a survey of NYSE firms. Financial practice and education, Vol.10, pp Bathala, C.T. and Rao, R.P. (1995). The Determinants of Board Composition: An Agency Theory Perspective. Managerial and Decision Economics, Vol Bebczuk, R.N. (2005). Corporate Governance and Ownership: Measurement and Impact on Corporate Performance and Dividend Policies in Argentina Belden, S., Fister, T. and Knapp, B. (2005). Dividends and Directors: Do Outsiders Reduce Agency Costs?. Business and Society Review, Vol Chang, R.P. and Rhee, S.G. (1990). The impact of personal taxes on corporate dividend policy and capital structure decisions. Deshmukh, S. (2003). Dividend initiation and asymmetric information: a hazard model. The Financial Review, Vol. 38 No. 3, pp Deshmukh, S. (2005). The Effect of Asymmetric Information on Dividend Policy. Quarterly Journal of Business and Economics Farinha, J. (2003). Dividend Policy, Corporate Governance and the Managerial Entrenchment Hypothesis: An Empirical Analysis Fama, E.F. and French, K.R. (2002). Testing Trade-Off and Pecking Order Predictions about Dividends and Debt. The Review of Financial Studies, Vol.15 No.1, pp Ho, H. (2003). Dividend Policies in Australia and Japan. International Advances in Economic Research, Vol. 9 No. 2, pp. 91100. Jensen, G.R., Solberg D.P. and Zorn T.S. (1992). Simultaneous Determination of Insider Ownership, Debt and Dividend Policies Khan, T. (2006). Company dividends and ownership structure: Evidence from UK panel data. The Economic Journal, Vol. 116 No Koch, P.D. and Shenoy, C. (1999). The information content of dividend and capital structure policies. Financial Management, Vol Kowalewski, O., Stetsyuk, I. and Talavera, O. (2008). Does Corporate governance determine dividend payouts in Poland?. PostCommunist Economies, Vol. 20 No. 2, pp. 203-218. Li, K. and Zhao, X. (2008). Asymmetric Information and Dividend Policy. Financial Management, Vol. 37 No. 4, pp. 673-694. Lintner, J. (1956). Distribution of Incomes of Corporations Among Dividends, Retained Earnings and Taxes. American Economics Review, Vol Mitton, T. (2004). Corporate governance and dividend policy in emerging markets. Emerging Markets Review, Vol. 5 No. 4, pp. Myers, M. and Bacon, F. (2004). The determinants of corporate dividend policy. Academy of Accounting and Financial Studies Journal Myers, S.C. (1984). The capital structure puzzle. Journal of Finance. Vol. 39 No. 3, pp. 575–592. Myers, S.C. and Majluf, N. (1984). Corporate financing and investment decisions when firms have information that investors do not have Naceur, S.B., Goaied, M. and Belanes, A. (2006). On the Determinants and Dynamics of Dividend Policy. International Review of Finance, Vol Rozeff, M. (1982). Growth, Beta and Agency Costs as Determinants of Dividend Payout Ratios. Journal of Schellenger, M.H., Wood, D.D. and Tashakori, A. (1989). Board of Director Composition, Shareholder Wealth, and Dividend Policy Short, H., Zhang, H. and Keasey, K. (2002). The link between dividend policy and institutional ownership. Jiraporn, P. (2004). Dividend policy, shareholder rights and corporate governance provisions. Working Paper, Texas AandM International University. Mehar, A. (2002). Corporate governance and dividend policy”, MPRA Paper No. 619, viewed 01 July2010, http://mpra.ub.unimuenchen.de/619/1/MPRA_paper_619.pdf Atrill, P Foster, J.J. (1998). Data Analysis Using SPSS for Windows – A Beginner’s Guide, SAGE Publications, pp. 188. BIDV Securities Company (2010). Shareholder structure. viewed for each listed firm in July 2010, http://www.bsc.com.vn. Vietstock (2010), VietstockFinance, viewed for each listed firms on July 2010, http://finance.vietstock.vn/Default.aspx.