Graduation Semester and Year




Document Type


Degree Name

Doctor of Philosophy in Finance



First Advisor

Sanjiv Sabherwal


This dissertation is comprised of two essays on dividend policy. In the first part of the first essay, I ascertain whether the outcome, the substitution, or the predation model explains the relationship between dividend payouts and product market competition in each of the Group of Seven (G7) countries for the period from 1995 through 2010. I find that the substitution model explains dividend policy in Canada, France, Germany, the United Kingdom, and the United States, and the outcome model describes it in Japan, while in Italy, the results are inconclusive. In the second part of the same essay, I pool the sample across the G7 countries and examine whether the outcome or the substitution model explains the relationship between payouts and product market competition. Additionally, I study the impact of various country characteristics--legal origin, religion, presence of corruption, and gross national income--on the relationship between payouts and industry competition. The results show that the substitution model explains dividend policy across the G7 nations. In addition, in countries with better investor rights dividend policy is explained by the substitution model, while in countries with poor investor protections the outcome agency model explains dividend policy. Thus, this essay first tests the three theories on dividend policy, and then it addresses how dividend policy responds to changes in external environments--country characteristics--in the presence of changing levels of competition.In the second essay, I explore whether managers utilize behavioral finance such as the convenience hypothesis, the attraction hypothesis, and the left digit effect in establishing dividend policy. Specifically, I examine whether clustering and rigidity exist in dividends per share (DPS) ending in zero and five. The study is conducted using Compustat dividend-per-share data for Canada and the United States for the period from 1995 through 2010, and for France, Germany, and Italy for the period from 1999 through 2010. I find that clustering (frequency) and rigidity (duration of DPS and number of DPS changes) are prevalent in DPS ending in zero and five, as hypothesized. Moreover, clustering and rigidity in zero-ending DPS are more prevalent than in those ending in five, as predicted. Finally, clustering and rigidity are nonexistent in DPS ending in nine in all countries tested. These findings would suggest that managers are utilizing behavioral finance in establishing dividend policy.


Business | Finance and Financial Management | Real Estate


Degree granted by The University of Texas at Arlington