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DETERMINANTS OF DIVIDEND POLICY IN ESTONIAN FIRMS: AN EMPIRICAL ANALYSIS
Abstract
The purpose of the article was to find out factors that affect dividend decisions in Estonian non-financial firms. Our analysis was based on the firm-level data of all Estonian companied for the period 2008-2011. Our dataset includes the period of latest financial and economic crises (2008-2009), which allowed us to analyze the dividend policy in case of extremely negative economic environment. Our database included more than 30 thousand observations. Based on the regression analysis we found that the factors influencing the dividend amounts were: total assets, return on assets, dividends paid in previous period and net profit for the year. All these factors had positive effect on dividend amounts. In addition, an important factor was also debt to equity ratio, which had negative impact on dividend payments. All statistically significant relationships were in line with the theoretical foundations. Thus, we showed that despite the very unique features of Estonian income tax system, major determinants of dividend policy were similar to those predicted by theory and found in other countries. The results were discussed and combined with the results of previous survey-based studies conducted in Estonia.
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