An empirical investigation of the impact of firm characteristics on the smoothness of dividend

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This paper empirically investigates the smoothness of dividends on non-financial companies in Jordan by applying the asymmetric partial adjustment model. In addition, this research investigated the data for 65 non-financial companies (37 industrial and 28 services) listed on the Amman Stock Exchange (ASE) covering the period 1997–2020. Fixed and random-effects techniques have been applied to check the smoothness of dividends. The results confirmed that the non-financial Jordanian companies smooth their dividends at a moderate rate, our results contradict the signaling theory; we find that large companies smooth their dividend faster than small ones. Furthermore, in line with the agency cost theory, low-leveraged firms smooth their dividends faster than high-leveraged firms. Also, our results confirmed that highly profitable companies smooth their dividend more and this comes in line with the signaling theory.

Keywords: Partial Adjustment Model, Signaling Theory, Agency Cost Theory, Fixed and Random-Effects Techniques

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: G3, G2, C1

Received: 16.03.2022
Accepted: 11.10.2022
Published online: 13.10.2022

How to cite this paper: Khalaf, B. A. (2022). An empirical investigation of the impact of firm characteristics on the smoothness of dividend. Corporate Governance and Organizational Behavior Review, 6(4), 122–133.