Dividend behaviour: Different market segmentations
Dividend behaviour: Different market segmentations

Summary/Abstract: This research explores the dynamics of dividend behaviour of Lintner’smodel in three distinct regimes with three different market segmentations,namely Singapore, Malaysia, and Saudi Arabia. In particular,Singapore, Malaysia, and Saudi Arabia each have some interestingfeatures that make this study suitable for policy recommendations toother Asian countries and countries in other parts of the world, especiallyin the same market segmentation. Therefore, it will be intriguingto see if these three countries adopt stable cash dividend policies,whether they smooth out dividends, and to determine the speed ofadjustment of dividends towards a long-run target payout ratio. Thestudy used the top 100 listed firms in each country using the GeneralisedMethod of Moments (GMM) for the period of 2007 to 2016. Theresults clearly demonstrate that Saudi Arabian firms have the smoothestand most stable dividend payout, followed by Malaysia which hasa moderate speed of adjustment suggesting fairly stable dividendsarising from a positive change in earnings, while Singapore has a significantlyhigh speed of adjustment indicating no smoothing. Basedon these findings, Saudi Arabian firms practise smoothing and havestable dividends. Although a great deal of research has been done usinga partial adjustment model, no evidence has been provided on thethree different markets. Most of the research focused on developedmarkets rather than emerging ones. This could therefore contribute tothe different legal and statutory systems that exist in these countries.The difference hinders the overall view of the results obtained fromthe three markets.

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