THE ACCOUNTING NUMBERS AND INVESTMENT DECISIONS IN EMERGING MARKETS

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Abstract

The main objective of this study is to determine the impact of dividend policy on stock price in Kuwait Firms. the study adopts the quantitative technique, gathering data from official listed Kuwaiti companies. All non-financial firms listed in Kuwait Stock Exchange from 1994 to 2003 This study will be based on a cross-sectional regression analysis of the relationship between stock price volatility and dividend policy after controlling for firm size, earning volatility, leverage and asset growth. Both dividend policy measures (dividend yield and payout ratio) have significant impact on the share price volatility.and examines the influence of dividend policy on stock price volatility and suggests the use of the following control variables in testing the significance of the relationship between dividend yield and price volatility: operating earnings; size of the firm; level of debt financing; payout ratio; and level of growth. These variables have a clear impact on stock returns but also impact on dividend yield. ‘SPSS’ statistical package to run statistical tests and answer study questions. Basic descriptive statistics (Mean, Standard Deviations) and frequency distribution were computed for each variable/question. Ordinary Least Squares (OLS) coefficient estimates are used in this study. F-tests are used to test for the relationship between stock price volatility and dividend policy. The results show that preference for dividends is larger amongst older investors, compared to younger investors. Old investors and investors without university education all have a preference for dividends because of transaction costs. On the other hand, young investors and investors with a university education have less interest in dividends based on transaction costs. The results also suggest that the watch for dividends as a safeguard measure is still “old-fashioned”, even in light of the recent accounting scandals.The results also indicate that individual investors believe that dividend payments contain a signal about the profitability of the firm.

Keywords: Dividend Policy, Investment Decisions, Kuwait Market

How to cite this paper: Al-Shattarat, H. K. (2015). The accounting numbers and investment decisions in emerging markets. Corporate Ownership & Control, 12(2-4), 443-454. https://doi.org/10.22495/cocv12i2c4p4