The Effect Of Distributed Earnings And Size Of The Firm To Its Dividend Policy: Some Greek Data

Abstract

The objective of this paper is to examine the corporate dividend policy for the Greek market. In a series of studies, concerning the Greek market, Vasiliou & Eriotis test and improve, using a panel of data, the classical study of John Lintner who explains the amount dividend paid by firms using the earnings of the firm plus an adjustment according to the dividend paid the year before. This paper is an extension of Vasiliou & Eriotis’ work that test the assumption that firms set their dividend policy not only by the net distributed earnings, but also by the change from the last year’s dividend, the change from the last year’s distributed earnings and the size of the firm. This model is applied on a panel sample of a large number of firms listed on the Athens Stock Exchange for the period 1996 – 2001.  The hypothesis that is tested in this paper is that the dividend at time t depends upon the distributed earnings at time t, the size of the firm and changes in dividend and distributed earnings from the last year (t-1). The empirical results verified the hypothesis that the Greek companies prefer to distribute, each year a rather constant dividend, which they adjust from year to year according to their distributed earnings and size.