An Analysis on the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations: Cash Dividend-Industry Behavior Relation

Dividend policy behavior of corporations operating in emerging markets is significantly different from the widely accepted dividend policy behavior of corporations operating in developed markets. There has been much discussion in dividend policy, industry ranking by dividend among academicians. This study examines the effect of cash dividends on stock market by covering the difference between cash and net cash dividend (cash dividend - rights offerings) and the differentiation of industry ranking for one of the leading emerging markets, the Istanbul Stock Exchange (ISE), for the period between 1990-2002 for industry ranking with a free distribution right for cash dividends after 1995. Our results are consistent with those of many other studies. Industry ranking by cash dividend ratio neither change dramatically nor show a stable trend over years, but is considerably affected from economic changes. The most affected industry from the economical changes is the financial institutions with banks taking place in the first rank. Interestingly, net cash dividend ratio shows a downward sloping trend following the rights offerings after the year 1995. Thus, it can be concluded that cash dividends affect industry ranking moderately and this evidence challenges the significant impact of cash dividends on the stock market, which cause much discussion on the effectiveness of cash dividends in the financial markets.