Increasing Dividend Policy Outcomes in Terms of Financial Constraints and Competition

The main purpose of this study is to investigate the consequences of the growing dividend policy in terms of financial constraints and conpetition. The investigation covers five years 2010-2014 and the sample consists of 145 listed companies in Tehran’s Stock Exchange. The dynamic analysis is conducted using a combination of the GMM approach and instrumental variables to check for endogeneity in variables. According to the results, the reaction of the capital market and stock turnover of companies after increasing dividend in firms with financial constraints, compared with firms without financial constraints, is weaker. This is especially the case for constrained firms that are in more competitive industries.