A Double-Hurdle Approach to the Analysis of Factors Affecting Dividend Payouts by Firms Issuing Restricted Stocks

The recent financial scandals, backdating problems, expensing of options and increasing use of restricted stocks have affected the cash dividend payout policies of firms, especially of those issuing restricted stocks. This research examines the accounting, financial and demographic variables affecting both the decision to pay cash dividends and the decision about the size of these payments by firms that issued restricted stocks. A double-hurdle approach was used to model the interaction between these two decisions and to study the statistically significant factors affecting each of them. The empirical evidence shows that the sets of statistically significant factors affecting the decision to pay dividends and the decision about the size of cash dividend payments are not the same. Firm's life cycle and degree of leverage had a statistically significant influence on the probability of paying cash dividends. On the contrary firm size, profitability, growth and the number of employees had a statistically significant influence on the amount of cash dividend payments