Studying the relationship between dividend policies with different liquidity criteria and the illiquidity factor in companies listed on the Tehran Stock Exchange.

Dissertation for Master's degree

Orientation: Accounting

Abstract:

Given the importance of the liquidity of companies' shares in the capital market, the present research seeks to investigate the factors affecting liquidity. In this regard, the impact of dividend policies on the liquidity of companies' shares has been tested. In this research, multiple linear regression has been used for all information. All the hypotheses have been done on 185 sample members.

The research results show that there is a positive and significant relationship between the dividend policy and liquidity rating at the 95% confidence level. And there is no meaningful relationship between dividend policy and liquidity with turnover rate method, Amiost ratio and Amihude ratio.

Key words: dividend policy, liquidity rating, liquidity by turnover rate method, Amiost ratio, Amihude ratio

Introduction:

Liquidity is not easy to define and measure, but in general, liquidity is the ability of the market to absorb huge volumes. Transactions are defined without excessive fluctuations in price. In addition, the main feature of cash markets[1] (having high liquidity) is the small distance between the bid and offer prices. This means that transactions are executed in a cost-effective way.

Liquidity in secondary markets plays a decisive role in the success of public offerings and reduces the cost and risk of underwriters[2] and market makers. Also, the cost of investors is reduced by reducing the range of fluctuations and transaction costs. Therefore From the macro point of view, the existence of liquid capital markets is necessary for the efficient allocation of capital. From the micro point of view, the liquid capital market also provides access to various trading strategies. Most investors (with a short-term investment horizon) prefer highly liquid stocks over low liquid ones. Regarding the liquidity of the stock market, we can refer to the difference in the price of the purchase and sale of shares. The need to understand and measure the factors that determine the difference in the price of the purchase and sale of the traders is very necessary in the evaluation of the competitive market structure. Fisher Block refers to it as the dividend puzzle. The decision to distribute dividends is one of the most important decisions of the company, so it is not surprising that many equations have already been published in this area. Basically, private investors invest to get returns. Receiving dividends is one of the ways to get returns. Dividend policy can be defined as creating a balance between the company's accumulated profits on the one hand and paying cash and issuing new shares on the other hand. (Khodadadi, 1388, 107) 1.

On the other hand, in each financial market, according to the breadth and depth of the market, there are various tools for investment. Investors invest according to the return and risk of assets. One of the factors influencing the risk of assets is their liquidity. The role of the liquidity factor in asset valuation is also important. Because investors pay attention to the issue that if they want to sell their assets, is there a suitable market for them or not? (Yahiyazadeh Far, 1387, 102) 2.

In this study, the relationship between different liquidity criteria and the illiquidity factor with dividend policies in companies admitted to the Tehran Stock Exchange has been examined. In the first chapter, after stating the research problem, we examine the history of the research subject; Then we define the topic of the research and continue to express the importance and necessity of the research. We also express the research objectives in the form of general objectives. The theoretical framework of the research, which was the main basis of the research question and topic, is presented in this chapter, and the research hypotheses and analytical model are also mentioned.

2-1 Study history

The following summary includes the name of the researcher, research topic, research implementation method and research result:

Golsten and Harris [1]; Estimating the components of the price difference in the purchase and sale offer; Shares were selected from NYSE stocks. The price difference is broken down into temporary components, including inventory maintenance costs, registration costs or exclusive benefits, and incorrect selection costs; Ignoring the independence of the price, the cost of incorrect selection covers 20% of the price difference, while considering the price independently, it covers 35% of the price difference.

Estelle [2]; Inferring the components of the price difference offered by buying and selling: experimental and theoretical tests; A sample of NASDAQ stocks was selected monthly (ranging from 765 to 821 stocks). Three basic components for the price difference were assumed: order processing costs, inventory holding costs and incorrect selection costs; The following estimates were obtained: incorrect information costs were 43%, maintenance costs (inventory risk) were 10%, and order costs were 47%. While the offered prices vary significantly in the shares, the components of the price difference seem to be the invariable part of the price difference. Estimating the price difference between buying and selling and its components: a new approach; Samples of AMEX/NYSE and NASDAQ stocks with unspecified sizes were selected. The price difference was broken down into ordering process costs and incorrect selection costs. They assumed that due to positive autocorrelation in the returns based on the suggested purchase or sale prices, there are no inventory maintenance costs; According to estimates, the cost of incorrect selection was 8% to 13% of the price difference. The cost of the order process accounts for a large part of the price difference. Evidence of inventory costs was not found.

Boureaux [4]; components of the price difference of the purchase and sale offer before and after the predicted information announcements; Stocks were selected from AMEX and NYSE. The price difference before and after the announcements of profit and dividend was investigated. The price difference was divided into a fixed part of transaction costs and incorrect selection costs, which also included inventory maintenance costs. Price differences are significantly higher around earnings announcements. The cost of incorrect selection for the entire sample includes 48% of the price difference.

Huang and Estelle[5]; The components of the difference in the purchase and sale price: a comprehensive approach; The share was selected from among the largest and most traded NYSE shares. The price difference includes incorrect selection costs, inventory holding costs and order processing costs based on different methodologies.; Incorrect selection costs when considered together with inventory holding costs range from 2% to 22% or an average of 11% of the price difference. Order process costs account for a large part of the price difference. When the cost of incorrect selection and the cost of holding inventory are considered separately, the average of the first one will be 10% and the average of the second one will be 29%.

Boon[6]; disclosure of oil and gas reserves and the difference in the proposed purchase and sale price; The analyzed group included 34 NASDAQ oil and gas companies. The difference between the bid and offer prices for one year before and after the disclosure of the value of the reserves was investigated in order to investigate the effect of ASR 253, which was published by the SEC in 1978 and required oil and gas companies to disclose the fair value of their oil and gas reserves. By controlling the effects of volume and price changes, the difference in the price offer of buying and selling shares in the studied group decreased by 43.06% during the year after the disclosure, which indicates the importance of the costs of incorrect selection due to the lack of information.

Brockman and Chunk [7]; The components of the difference in the price of the purchase and sale offer in an orderly environment; A company listed on the Hong Kong Stock Exchange. Where liquidity was chosen through public limit orders, which equates to an automated system, rather than through experts or hedgers. The price difference includes the costs of incorrect selection and the costs of the order process. The average cost of incorrect selection, which reflects the risk of trading based on confidential information, usually for non-investors, due to the lack of market centers, was estimated at 33%, and the average cost of the order process was estimated at 45%. An analysis of the market behavior of the European quarters in NASDAQ; The foreign (European) NASDAQ share was selected