The Investigation of the Effect of Cash Flow Uncertainty on the Investment-Dividends Sensitivity

The purpose of this research is to investigate the effect of cash flow uncertainty on investment-dividends sensitivity in the companies listed in Tehran Stock Exchange (TSE). In this research, cash flow uncertainty is measured by cash flow shortfall and cash flow volatility and the effects of each of these two measures on relationship between dividends and investment has been investigated separately. The research hypotheses were tested based on a sample including 96 companies for 8 year period between 2003-2011using multiple regression model and pooled data method. The result of hypothesis testing indicated that there is a significant negative relationship between dividends and investment. The cash flow shortfall and cash flow volatility reduce investment-dividends sensitivity. In other words, cash flow uncertainty reduces the extremity of negative relationship between investment and dividends.