IMPACT OF A COMPANY’S DIVIDEND POLICY ON THE LIQUIDITY OF SHARES LISTED ON THE WARSAW STOCK EXCHANGE

Abstract

This study investigates the informational effect of stock liquidity on dividend payouts. Using a sam- ple of Polish listed companies during 2000 - 2012, I do not find a relation between stock liquidi- ty and dividend payouts. This result is robust to the use of alternative measures of liquidity, and holds after we control for endogeneity concerns. In accord with my hypothesis that stock liquidity provides information and increases insiders’ incentive to pay out dividends, I do not find that the relation between stock liquidity and dividend payouts is more pronounced when the information environment is opaque, and when conflict between controlling shareholders and minority inve- stors is severe. The aim of this study is to show the dependencies occurring between dividend policy and the liqu- idity of shares of a company. The basic thesis of this study is that decisions on dividend payments positively affect the liquidity of the shares of a company.