Investigating the relationship between systematic risk and dividend policy of companies in Tehran Stock Exchange

Statement of the problem

The stock exchange is the main way of equipping and optimal allocation of capital in the country, and knowing this market and the elements and connections in it is considered one of the important factors in the capital market.  Investors are one of the important elements of this market. Investors have different goals for investing in companies' shares. They try to direct their resources in the capital market to a direction that is most profitable for them, and if their investment does not lead to the desired profit, they will exit the stock market and invest in other activities, which will lead to a decrease in stock trading and the stock market's prosperity. In this regard, awareness of the risk level of companies can also play a significant role in people's decision making. In financial literature, risk is defined as the probability of a difference between the actual return and the expected return and is divided into two categories. The first category includes risks that are related to the company's internal factors, such as management risk, liquidity risk, debt default risk, etc., which is called non-systematic (reducible) risk. The second category: includes risks that are not specific to one or more companies, but are related to general market conditions, such as economic, political, social, etc., and are uncontrollable and irreducible under the name of systematic risk (?), therefore, they can play a significant role in the decision-making of company managers and investors. One of the ways to predict systematic risk is to determine the relationship between financial (accounting) factors and systematic risk. One of the important financial (accounting) factors in companies is the company's dividend policy , dividend distribution has had many complications for economists, financial analysts and other investors, and the relationship between dividend policy and corporate stock returns has been examined in numerous researches. Miller and Modigliani [1] (1985) believed that in a perfectly competitive market, due to the existence of information symmetry between people active in the capital market, the way in which the company's dividends are distributed is clear, and the said division does not affect the stock price of the business unit, but as we know, the current capital markets in the world and Iran are markets that That information is not available to everyone to the required extent and investors are facing an imperfect competition market and always more profit is more informed than those investors. For this reason, the news of a company's profit distribution or non-distribution will have the greatest impact on the fluctuation of the company's stock price. According to this situation, economic thinkers, among whom we can mention Allen and Woles [2] (2000), have presented various theories about dividend behavior.

One of the most obvious theories is the dividend signaling theory, under the dividend signaling model, it is used as a signal to reduce the level of information asymmetry in the capital market. But this theory has not been able to have a major impact on this reduction, and the insiders of the companies, which are managers among them, by having important and fundamental information, get more benefits from buying and selling and dividend distribution than other investors.

As a result, the researcher seeks to find out whether there is a relationship between the systematic risk (?) of ordinary shares of companies listed on the Tehran Stock Exchange and the dividend policy of these companies or not? In order to answer this question, the researcher has used the indicators proposed by Fama and French in 2001, which include company size, company risk, profitability, the percentage of interest paid, and the ratio of market value to book value, among the various components affecting the dividend policy.

So that finally, company managers can adjust their decision-making and planning based on this relationship. And investors should also decide whether to buy the company's shares or to invest in another sector.

The importance and necessity of research

One of the most important topics in the capital market is to know the level of risk of companies, especially systematic risk, which can play a significant role in decisions. Because it is believed that companies' stock returns are a function of systematic risk, and systematic risk represents the changes in the return rate of a share compared to the changes in the return rate of the entire stock market.. In the capital market as well, investors try to invest in a place that will bring them the highest return, and in this regard, they also pay attention to the risk related to investment, and they are willing to bear the risk if they receive a reward for it, and this income will be nothing but more profit from the investment. On the other hand, companies are also trying to operate in such a way as to achieve the main goal of the company's owners (shareholders), which is to increase the value of the company. As a result, the importance of research is that investors and companies can use the results of the research to adjust their decisions or make new decisions based on them.

Continuity of the profitability trend was identified and determined as the first factor affecting the profit response coefficient. (Yeo Kim, 2002, 4) They explain the systematic

1991-2000

Andrew Brimble

(2003)

Net profit growth and operating profit growth have a positive relationship with systematic risk, and with the increase in debt-to-asset ratio, the relationship becomes weaker.

1982-1987

Prakash and Anderson

(1994)

Cash flows from operations, profit belonging to common shareholders, profit belonging to common shareholders plus depreciation and profit belonging to common shareholders plus depreciation and tax have a significant relationship with systematic risk.

1975-1985

Ismail and Kim

(1989)

There is a significant relationship between profit distribution ratio, growth, financial leverage, company size and profit variability with systematic risk.

1977-1963

Algorz and Miuri

(1982)

Significant relationship between systematic risk and the variables of ratio of net profit to market value of ordinary shares, return ratio assets, return on equity ratio, but the relationship is weak and about R2 is equal to 20%.

1956-1961

Beaver and Mingold

(1975)

The variables of profit distribution, asset growth, financial leverage, current ratio, size, profit variability, accounting beta have a significant and strong relationship with systematic risk. and therefore they can be used to choose the optimal portfolio.

1947-1965

Beaver, Kettler and Scholes

(1970)

Significant correlation between the systematic risk of the market and the variables of systematic risk based on accounting profit, systematic risk based on adjusted cash flows and systematic risk based on operational cash flows.

1373-1377

Hassan Sedi

(1380)

There is no relationship between the variables of industry type, company size, sales dispersion, degree of operational leverage, degree of financial leverage and systematic risk.

(1375)

3- The aspect of novelty and innovation in research (your thesis compared to the researches that you have listed in the literature review and research background, what is the innovation in terms of title, method, case example, etc. will have?): According to the researches that have been mentioned in the history of the research, this issue has not been examined so far.

4_Research Objectives

The scientific objectives of the research are to discover the relationship between two factors influencing the decisions of Iran's capital market, i.e. systematic risk and profit sharing policy, with the intention of strengthening the body of science and adding to the existing information, and as a result, it will be used by future researchers. Its practical purpose is that if people can predict the amount of systematic risk by using changes in the profitability of the company, their desire to invest in stocks will increase, so they will make better decisions in the field of investments. Another goal is that investors can achieve their desired profit with the help of this connection and finally enter the stock exchange transactions with a broader view, which will lead to the prosperity of the Iranian capital market.