The Influence of Financial Performance on Payout Policy: a Study of Estonian Firm

  • Argo Teral
  • Oliver Lukason
  • Priit Sander
Keywords: payout policy, dividend policy, financial performance

Abstract

Payout (dividend) policy has been a controversial topic for decades. Theoretical and empirical literature has listed dozens of factors that could affect firm’s payout decisions. Current paper analyses the influence of financial performance on firms’ payout decisions based on a large sample of Estonian companies and covers the financial and economic crises period of 2008-2009. The results indicate that past financial performance indicators are poor predictors of future dividends (measured both by payout ratio and the value of dividends). The connection between the dividends paid and future earnings of the firm turned out to be remarkably stronger, i.e. dividends seem to possess some predictive power.

Author Biographies

Argo Teral
University of Tartu
Oliver Lukason
University of Tartu
Priit Sander
University of Tartu
How to Cite
Teral, A., Lukason, O., & Sander, P. (1). The Influence of Financial Performance on Payout Policy: a Study of Estonian Firm. Estonian Discussions on Economic Policy, 20(1). https://doi.org/10.15157/tpep.v20i1.784
Section
Articles. Artikeln. Artiklid