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Life-Cycle Theory and Free Cash Flow Hypothesis: Evidence from Dividend Policy in Thailand

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  • Yordying Thanatawee

Abstract

This paper examines dividend policy of Thai listed companies over the period 2002-2008. The results show that larger and more profitable firms with higher free cash flows and retained earnings to equity tend to pay higher dividends. In addition, the evidence indicates that firms with higher growth opportunities, proxied by market-to-book ratio, tend to pay lower dividend payout ratio but higher dividend yield. Collectively, the findings from this paper provide much support for the free cash flow and life-cycle hypotheses. Further, it is found that financial leverage is positively related to dividend payouts, a finding which casts doubt whether Thai firms rely on debt to pay dividends.

Suggested Citation

  • Yordying Thanatawee, 2011. "Life-Cycle Theory and Free Cash Flow Hypothesis: Evidence from Dividend Policy in Thailand," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 2(2), pages 52-60, July.
    • Handle: RePEc:jfr:ijfr11:v:2:y:2011:i:2:p:52-60
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    Citations

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    Cited by:

    1. Sue-Tzeng Chuang & Ying-Hsiang Chen & Ching-Chieh Lin & Wen-Chih Lee, 2018. "The Impact of Tax Deduction Ratio Reduction on Dividend Payouts Under the Integrated Tax System: Evidence From Taiwan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(3), pages 26-35, July.
    2. Rafiu Oyesola Salawu & Segun Wale Olayinka & Momodou Mustapha Fanneh & Mary Kehinde Salawu, 2022. "Liquid Stock and Financial Performance of Non-Financial Quoted Companies in Nigeria," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 10(4), pages 152-163.
    3. Mehdi Maranjory & Samira Keykha, 2016. "Evaluation of the Effect of Company's Life Cycle on the Cost of Equity," Modern Applied Science, Canadian Center of Science and Education, vol. 10(12), pages 237-237, December.
    4. Lin Tian & Liang Han & Song Zhang, 2015. "Business Life Cycle and Capital Structure: Evidence from Chinese Manufacturing Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(2), pages 22-39, March.
    5. Fuad Suliman Al-Fasfus, 2020. "Impact of Free Cash Flows on Dividend Pay-Out in Jordanian Banks," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(5), pages 547-558, May.
    6. Baker, H. Kent & Dam, Lammertjan & De Ridder, Adri, 2021. "Payouts and stock ownership," Journal of Multinational Financial Management, Elsevier, vol. 60(C).
    7. John Elim, 2019. "Model of Firm Value Indonesian Stock Exchange Case," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 154-162.
    8. Jasminder Kaur, 2019. "Firm’s Life Cycle Spurs the Dividend Payments: A Fallacy or an Actuality?," Paradigm, , vol. 23(1), pages 36-52, June.
    9. Waseem Khan & Naheed Ashraf, 2014. "In Pakistani Service Industry: Dividend Payout Ratio as Function of some Factors," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 390-396, January.
    10. Rola Elkabbani & Christian Richter & Mona ElBannan, 2020. "Determining dividend payouts of the MENA banking industry: a probit approach," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 221-229.

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