Dividend Increases and Stock Dividend Policy and Firm’s Default Risk / Manassanant Laoritthikrai
37 leaves: tables
This paper examines whether the risk factor: default risk can explain firm’s dividend policy using data from listed firms that pay either cash dividend or stock dividend from the Thai, Singaporean, Indonesian and Malaysian stock market. For cash dividend payout, when firm has a reduction in default risk, I find an increase in its payout in subsequent period. On the other hand, firm faces with financial distress, I find both an increase in its payout and a stable cash dividend paid. This is consistent with the sticky dividend hypothesis. For a stock dividend point of view, I find an evidence that firm with a decrease in default risk from the prior period tends to pay stock dividend. This implies that default risk is an important factor that can explain firm’s dividend policy decision.