Evaluation the Effect of life Cycle, Growth Option and Financial Reporting Quality in Mitigating the Constraining Effects of Dividend on Investment Decisions

Subject Areas : HSE Management

Ali Naderi ¹ , Mohsen Dastgir ² , Farzad Karimi ³

1 - PhD Student, Department of Accounting, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran
2 - Professor, Department of Accounting and Financial Management, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran (Correspondence)
3 - Associate Professor, Department of Management, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran

Received: 2021-01-13 Accepted : 2021-11-07 Published : 2022-02-20

Keywords: Financial Reporting Quality, Dividend Policy, Growth opportunities, Investment decisions, Firm Life Cycle,

Abstract :

In full capital market there is no relationship between dividend policy and investment decisions. However, frictions of capital market result in the appearance of negative effect of dividend on investment decisions. On way to modify this negative effect is qualified financial reporting. This modifying effect is more prominent among adolescent firms and firms with high level of investment opportunities. Therefore, the final goal of this research is to investigate modifying effect of life cycle (adolescent firms) and growth opportunities on the negative relationship between dividend and investment decisions.Four hypotheses are considered for answering the above goal. In this way a sample consist of 105 firms listed in Tehran stock exchange were selected to test hypotheses. For estimating regression models, combined data were used during 1390 to 1398. The findings show that dividend has negative effect on the level of firm investment and this effect can be modified by high level of financial reporting quality. This modification effect is more prominent among adolescent firms and firms with high level of investment opportunities. According to these findings, the modifying effect of life cycle and growth opportunities on the modifying effect of financial reporting quality are confirmed empirically.