The Effect of Cash Distributions to Shareholders on Operational and Free Cash Flow Predictability

This paper examines the effectiveness of cash distributions to shareholders on operational and free cash flow predictability.
The Wilcoxon rank sum test has been used to compare the prediction errors and data from 123 firms listed in Tehran Stock Exchange (TSE) for the period from 2002 to 2011 has been examined.
Results show that operational and free cash flow prediction errors are different among firms with least and most net cash distributions to shareholders, and also with least and most size. Also, results indicate that, after controlling firm size effect, net cash distributions to shareholders have effect on operational cash flow prediction error, however, after controlling firm size effect, net cash distributions to shareholders have no effect on free cash flow prediction error.
Actually this study suggests that net cash distribution to shareholders is a sign of future condition of operational cash flow.