Dividend Policy Determinants: An Investigation of the Influences of Stakeholder Theory

This paper investigates the relationship between the dividend-policy decisions and investment decisions of a firm. Recent literature proposes a theory that links the two decisions. This link is stakeholder theory, which views the firm as a nexus of contracts and includes both investors and non-investors as stakeholders of the firm. By using a proxy for the level of non-investor stakeholder influences, our research finds that a relationship does exist. This is indicated by the firm having a lower dividend-payout ratio, which indicates its ability to make good on the implicit claims of non-investor stakeholders.