Journal of Commerce and Accounting Research

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Life-cycle Theory, Free Cash Flow and Dividend Policy in Firms Listed in Tehran Stock Exchange


Affiliations
1 Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran, Islamic Republic of
2 Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
3 Department of Accounting, Osku Branch, Islamic Azad University, Osku, Iran, Islamic Republic of
     

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The purpose of this study is to investigate the relationship between Life-cycle Theory (LCT) and Free Cash Flow (FCF) hypothesis with dividend policy in listed firms in Tehran Stock Exchange (TSE). The sample of the research includes 90 firms listed in TSE which is studied during the period of 2006-2010. The results show that there is a significant positive relationship between profitability (return on assets), leverage and firm size with dividend policy. In addition, results indicate that there is a significant negative relationship between investment opportunities and firms life cycle with dividend policy. Finally, findings highlight that there is not a significant relationship between FCF and dividend policy. These findings support LCT but not FCF hypotheses.

Keywords

Dividend Policy, Life-cycle Theory, Free Cash Flow Hypothesis
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  • Life-cycle Theory, Free Cash Flow and Dividend Policy in Firms Listed in Tehran Stock Exchange

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Authors

Saeid Jabbarzadeh Kangarlouei
Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran, Islamic Republic of
Ali Hasanzadeh
Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
Morteza Motavassel
Department of Accounting, Osku Branch, Islamic Azad University, Osku, Iran, Islamic Republic of

Abstract


The purpose of this study is to investigate the relationship between Life-cycle Theory (LCT) and Free Cash Flow (FCF) hypothesis with dividend policy in listed firms in Tehran Stock Exchange (TSE). The sample of the research includes 90 firms listed in TSE which is studied during the period of 2006-2010. The results show that there is a significant positive relationship between profitability (return on assets), leverage and firm size with dividend policy. In addition, results indicate that there is a significant negative relationship between investment opportunities and firms life cycle with dividend policy. Finally, findings highlight that there is not a significant relationship between FCF and dividend policy. These findings support LCT but not FCF hypotheses.

Keywords


Dividend Policy, Life-cycle Theory, Free Cash Flow Hypothesis