The Relationship of Dividend Smoothing with Corporate Governance Tools and Stock Liquidity

This article was aimed to collect and cite evidences about the effect of corporate governance tools on dividend smoothing and، in turn، the latter’s impact on stock liquidity. Therefore، a sample of 115 corporations accepted to Tehran Stock Exchange within a period of eight years، i. e. 2002-2009، were selected and surveyed. Panel data multiple regression analysis were employed to test the hypotheses. Meanwhile، t-statistic and F-statistic were taken to test the significance of the hypotheses. The criteria used for corporate governance mechanism included the percentage of the outside directors as well as the percentage of the institutional stockholders. The results of testing the first hypothesis indicated a positive and significant relationship between the percentage of the institutional stockholders (as a corporate governance mechanism) and dividend smoothing. However، no significant relationship was observed between the percentage of the outside directors and dividend smoothing. The criterion used for the stock liquidity was the bid-ask spread. The results of testing the second hypothesis showed a negative and significant relationship between dividend smoothing and stock liquidity.