The Dividend Puzzle: A Review

Abstract

The purpose of this study is to comprehensively review the determinants and explanations of dividend policy. Using systematic literature review approach, 355 research studies in dividend policy have been reviewed and a sample of 185 studies was selected based on the importance they ascribed to the dividend puzzle. A crossover analysis was carried out critically reviewing 123 research articles from the final sample. The results presented in this study revealed contradiction with a high level of discrepancy amongst studies both in terms of theories and determinants of dividend policy. Moreover, there is no published research study focused on all determinants and explanations, and there were no distinctive factors which affect the dividend policy alone and it is suggested to proceed with the dividend decision model for a single consensus of the dividend puzzle.It is notable that, researchers should have balanced focus on organizational, market and behavioral determinants when examining dividend policy. Management and investors should consider all the imperfections or factors, their interactions and consequences when making important dividend and/or stock decisions. The future studies conducted in the same phenomenon should be more comprehensive and should be carried out through the dividend decision model in a mixed method approach in order to overcome the research gaps arisen within the current paradigm. Otherwise, they are likely to result in a blind search. This study is conducted comprehensively reviewing all available theories and empirical determinants of corporate dividend policy and emphasize on the dividend decision model to deal with the dividend puzzle.