*2.2. Factors A*ff*ecting Dividend Policy—A Comparison across the Globe*

La Porta et al. (2000a) compare the dividends for 33 countries across the world. They report that the dividend payout is higher in countries that have a stronger system of investor protection. However, in such countries, the payout is lower for those companies who have high growth opportunities. Ramcharran (2001) has examined the differences in dividend yields for twenty-one emerging market economies (including India) from 1992–1999. The study found that in countries with a higher country risk, firms tend to have lower dividend payouts to use cash flows for financing future growth opportunities.

Aivazian et al. (2003b) have compared the factors influencing the dividends of emerging market firms with U.S. firms. The results show that the level of dividends paid by emerging market companies is similar to U.S. firms, excluding Turkey (because of the imposition of legal constraints). Also, a similar relationship is found between dividend policy and the following three variables: profitability ratio, debt ratio, and the ratio of market to book value as revealed by U.S. firms. For both size coefficient and business risk coefficient, the signs are inconsistent. Further results have shown that in comparison with the United States, the companies in six emerging market countries with higher tangible assets tend to pay lesser dividends.

Mitton (2004) states that companies having strong corporate governance and lesser investment opportunities pay higher dividends, for firms across 19 countries. Brav et al. (2005) have compared dividend payout policies in the 21st century for the United States and Canadian public and private companies. They report that the existence of good investment avenues is essential for dividend decision. Taxes are not found to be significant.

Denis and Osobov (2008) have examined the dividend payout determinants for six countries with well-established financial markets, namely: the United States, Canada, the United Kingdom, Germany, France, and Japan. In line with (Fama and French 2001), this study also confirms that firm size, growth opportunities, and profitability are significant factors that help to determine dividends. The retained surplus to total equity ratio is also established as a significant factor of dividend policy.

Brockman and Unlu (2009) have found that there exists a positive relation between creditor rights and probability to pay dividends, as well as the amount of dividend payout for 52 countries across the globe. Abor and Bokpin (2010) have evaluated the dividend policy for 34 emerging markets, and report that investment opportunity and dividends have a significant negative relationship. Furthermore, profits and the market capitalization of stock also influence dividend decision. However, additional

measures, namely, external financing, financial leverage, and debt finance, do not significantly impact the dividend payout.

Farooq and Jabbouri (2015) have found that dividends and cost of debt are negatively associated with each other for the Middle East and North African region (MENA) firms. They also report that this phenomenon is more prevalent in firms having higher information asymmetries.
