This paper examines life-cycle theory and free cash flow hypothesis and their impact on the dividend policy in Tehran stock exchange. In particular, in this paper we test the free cash flow hypothesis by examining the relation between free cash flow and dividend payout in over the period 2004-2011. This paper also tests the life-cycle theory of dividends proposed by Anthony and Ramesh (1992).The results show that larger and more profitable firms (Maturity stage) with higher free cash flow and retained earnings to equity tend to pay lower dividends. In addition, the evidence indicates that firms with higher growth opportunities (Growth stage), tend to pay lower dividend. In addition, the evidence indicates that firms in the decline tend to pay lower dividends. Collectively, the findings from this paper provide, except for the second hypothesis, support for the life-cycle theory and free cash flow hypothesis. Further, it is found that, firm size, growth of sales, and return on assets are positively related to dividend payout.
bulue, G., Parsian, H., & Nemati, R. (2013). Effect of Free Cash Flow on Dividend Policy in Life Cycle of Companies. Applied Research in Financial Reporting, 1(1), 51-74.
MLA
Ghasem bulue; Hosein Parsian; Reza Nemati. "Effect of Free Cash Flow on Dividend Policy in Life Cycle of Companies". Applied Research in Financial Reporting, 1, 1, 2013, 51-74.
HARVARD
bulue, G., Parsian, H., Nemati, R. (2013). 'Effect of Free Cash Flow on Dividend Policy in Life Cycle of Companies', Applied Research in Financial Reporting, 1(1), pp. 51-74.
VANCOUVER
bulue, G., Parsian, H., Nemati, R. Effect of Free Cash Flow on Dividend Policy in Life Cycle of Companies. Applied Research in Financial Reporting, 2013; 1(1): 51-74.
