Testing the Liquidity Hypothesis in the Korean Retail Firms

Kim, Sang-Su, & Lee, Jeong-Hwan. (2017). Testing the Liquidity Hypothesis in the Korean Retail Firms. The Journal of Distribution Science(JDS), 15(5), 29-38, https://doi.org/https://doi.org/10.15722/jds.15.5.201705.29

복사

Abstract

Purpose - Prior theories predict a negative correlation between stock liquidity and dividend payout propensity. We test this hypothesis by examining the sample Korean retail firms. Research design, data, and methodology - We construct four different types of stock liquidity measures and investigate how these stock liquidity variables affect dividend payout propensity by employing the logit regression model. The retail firms listed in the KOSPI and KOSDAQ markets are analyzed from 1990 to 2015. Results - Our estimation results support the liquidity hypothesis if we adopt the stock turnover rate as the stock liquidity measure, particularly for the retail firms listed in the KOSPI markets and for non-conglomerate firms. Yet, our estimation results adopting the illiquidity measure of Amihud (2002), the proportion of non-trading day, and the volume of trading do not support the liquidity hypothesis. Conclusions - Our findings provide mixed results for the validity of stock liquidity hypothesis, which enriches the existing literature. In terms of turnover rate, the stock liquidity hypothesis holds robustly. Yet, we are not able to find any empirical evidence supporting the hypothesis if we use the other three measures of stock liquidity.

keywords: Dividend Policy, Liquidity Hypothesis, Retail Industry

참고문헌

Banerjee, S., Gatchev, V. A., & Spindt, P. A. (2007). Stock Market Liquidity and Firm Dividend Policy. Journal of Financial and Quantitative Analysis, 42(2), 369-397.

Bhattacharya, S. (1979). Imperfect Information, Dividend Policy, and “The Bird in the Hand” Fallacy. Bell journal of economics, 10(1), 259-270.

DeAngelo, H., DeAngelo, L., & Stulz, R. M. (2006). Dividend Policy and the Earned/Contributed Capital Mix: A Test of the Life-Cycle Theory. Journal of Financial economics, 81(2), 227-254.

Denis, D. J., & Osobov, I. (2008). Why Do Firms Pay Dividends? International Evidence on the Determinants of Dividend Policy. Journal of Financial economics, 89(1), 62-82.

Dong, M., Robinson, C., & Veld, C. (2005). Why Individual Investors Want Dividends. Journal of Corporate Finance, 12(1), 121-158.

Easterbrook, F. H. (1984). Two Agency-Cost Explanations of Dividends. The American Economic Review, 74(4), 650-659.

Griffin, C. H. (2010). Liquidity and Dividend Policy:International Evidence. International Business Research, 3(3), 3-9.

Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The American Economic Review, 76(2), 323-329.

Kim, J. W. (2016). The Effects of Stock Liquidity on the Firm's Dividend Policy in Korean Stock Market. Korean Corporation Management Review, 69(0), 25.

10.

Kim, S. S., & Lee, J. H. (2016). The Marginal Value of Cash and Agency Conflicts in Korean Firms. The Journal of Asian Finance, Economics and Business, 3(4), 5-16.

11.

Miller, M. H., & Modigliani, F. (1961). Dividend Policy, Growth, and the Valuation of Shares. The Journal of Business, 34(4), 411-433.

12.

Miller, M. H., & Rock, K. (1985). Dividend Policy under Asymmetric Information. The Journal of Finance, 40(4), 1031-1051.

13.

Muhammad, H., Shah, B., & ul Islam, Z. (2014). The Impact of Capital Structure on Firm Performance:Evidence from Pakistan. Journal of Industrial Distribution & Business, 5(2), 13-20.

14.

Singh, T., Mehta, S., & Parmar, V. (2016). Developing Relationship between Investors Psychology and Financial Decision Making. East Asian Journal of Business Economics, 4(2), 28-47.

바로가기메뉴

논문 상세

Vol.15 No.5

Testing the Liquidity Hypothesis in the Korean Retail Firms

Testing the Liquidity Hypothesis in the Korean Retail Firms

Abstract

참고문헌

The Journal of Distribution Science(JDS)