Dividend Policy and Market Liquidity of Stocks of Companies Traded on Emerging Country Stock Markets
Dividend policy; Stock liquidity; Emerging markets; Decision-making
Dividend policy is associated with a company's decision to distribute the results produced from its investment activities. Studies point to the existence of a relationship between liquidity and dividend policy in the stock market, but the results differ, making it difficult to reach a consensus conclusion on this topic. Jiang, Ma and Shi (2017), Hu et al. (2019), Nguyen (2020) empirically found in their research a positive relationship between liquidity and dividend policy. Baneijee, Gatchev, and Spindt (2007), Griffin (2010), and Michaely and Qian (2022), on the other hand, found a negative relationship between the mentioned variables. The purpose of this study is to analyze whether stock liquidity affects the dividend policy of firms listed in emerging country capital markets. The literature and empirical studies do not yet extend to other groups of countries, such as emerging countries, which have been little explored so far. Given this perspective, emerging countries present themselves as an attractive market to study in order to aid understanding of the topic and to understand how stock liquidity can affect the dividend policy of these countries, markets, and institutional trading environments. The research sample comprises the group of emerging countries with large economic growth potentials called BRICS - Brazil, Russia, India, China and South Africa, and the Latin American emerging countries that make up the MSCI - Emerging Markets Latin America Index as of October 2022, they are: Brazil, Chile, Colombia, Mexico and Peru. The research methodology relies on panel data regression econometric methods and some tests to evaluate the results of the models. The research will contribute to the knowledge about the relationship between stock market liquidity (market finance) and dividend policy (corporate finance), besides exploring a new market: the emerging countries.