The Importance of Dividends in Declining Markets: The Case of Thailand
Keywords:
dividend policy, investors’ preferences, business cycle, Thai financial marketAbstract
We present empirical evidence on the relevance of dividends in the Thai market. The study outcome reveals that investors are not indifferent regarding firms payout policy, and dividend-paying firms have a superior performance during both declining and advancing markets, but with a clear advantage for the first type. That is, Thai shareholders prefer dividend-paying stocks more in periods where the economy is not performing well. The results are not driven by investors’ preference for large and profitable firms, which in average pay larger dividends, but rather by the prospect of receiving dividends during economic downturns. The findings confirm that dividend payout policy is not irrelevant in the Thai context and provide important insights on the motivations firms have to pay dividends, further advancing the understanding of the dividend payout “puzzle”.
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