Financial Constraints, Dividend Policy and Financial Crisis of Firms

Abstract

Since the main objective of firms is to gain earnings and maximize the shareholders’ wealth, one of the factors affecting it is firm’s dividend policy. Dividend policy issue has been always one of the most important proposed financial issues. The aim of implementing such a policy is determining the role of this policy in maximizing the shareholders’ wealth. Therefore, the firms’ being in financial constraints may affect the firms’ dividend policy. The purpose of this study is to evaluate the relation of financial constraints with dividend policy and financial crisis in firms listed on the Tehran Stock Exchange. To achieve this goal, a sample, consisting of 115 firms listed in Tehran Stock Exchange during the five-year period from 2008 to 2012 has been investigated. To verify the research hypotheses, multiple regression test has been used. The results of the hypotheses testing show that by the change in the amount of financial restrictions based on KZ index, earnings per share, dividend per share and the risk of financial crisis will change.