A Two-Step Approach to Investigate Dividend Policy: Evidence from Vietnamese Stock Market

Pascal Alphonse, Quoc Trung Tran


Dividend policy includes two steps of making decisions, namely dividend payment and dividend magnitude; however, several prior studies focus on only one in two steps. This study investigates dividend policy in Vietnamese stock market with Heckman’s two-step regression approach which fixes the selection bias caused by censored research data. Research findings show that in the first step, likelihood of dividend payment is positively affected by profitability, firm size and earned/contributed capital mix and state control while it is negatively related to investment opportunities, stock liquidity and insider ownership. In the second step, investment opportunities and insider retention have a negative impact on dividend yields while leverage has negative and positive impacts on payout ratio and dividend yield respectively. Contrary to free cash flow hypothesis, free cash flows to total assets ratio is negatively related to payout ratio.

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DOI: https://doi.org/10.5539/ijef.v6n3p16

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email: ijef@ccsenet.org

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