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Dividend Changes and Future Profitability: Evidence from the Turkish Stock Market

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  • Eyup Kadioglu
  • Nurcan Ocal

Abstract

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.

Suggested Citation

  • Eyup Kadioglu & Nurcan Ocal, 2016. "Dividend Changes and Future Profitability: Evidence from the Turkish Stock Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(3), pages 196-205, March.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:3:p:196-205
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    References listed on IDEAS

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    3. Young M. Choi & Hyo K. Ju & Young K. Park, 2011. "Do dividend changes predict the future profitability of firms?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 51(4), pages 869-891, December.
    4. Gustavo Grullon & Roni Michaely & Shlomo Benartzi & Richard H. Thaler, 2005. "Dividend Changes Do Not Signal Changes in Future Profitability," The Journal of Business, University of Chicago Press, vol. 78(5), pages 1659-1682, September.
    5. Healy, Paul M. & Palepu, Krishna G., 1988. "Earnings information conveyed by dividend initiations and omissions," Journal of Financial Economics, Elsevier, vol. 21(2), pages 149-175, September.
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    8. Benartzi, Shlomo & Michaely, Roni & Thaler, Richard H, 1997. "Do Changes in Dividends Signal the Future or the Past?," Journal of Finance, American Finance Association, vol. 52(3), pages 1007-1034, July.
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    10. Siew-Peng Lee & Mansor Isa & Wei-Ling Lim, 2012. "Dividend Changes and Future Profitability: Evidence From Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 8(2), pages 93-110.
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    Cited by:

    1. Małgorzata Snarska & Tomasz K. Wisniewski & Andrzej Zygula, 2020. "Are Emerging Markets Efficient? Evidence from Informational Content of Dividend Changes in Polish Stock Market," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 687-717.
    2. Faruk Bostanci & Eyup Kadioglu & Guven Sayilgan, 2018. "Determinants of Dividend Payout Decisions: A Dynamic Panel Data Analysis of Turkish Stock Market," IJFS, MDPI, vol. 6(4), pages 1-16, November.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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