Share price informativeness and dividend smoothing behavior in GCC markets

This paper examines the dividend smoothing behaviour in Gulf Cooperation Council (GCC) countries, in emerging markets where the response to news and the economic environment are different from those of developed countries. We examine the effect of share price informativeness on dividend smoothing in the (GCC) markets, using an unbalanced panel data for a sample of 628 GCC-listed firms during 1994-2016. For the regression analysis, the hypotheses are tested using panel regressions and GMM estimation. The empirical results can be summarised in the following manner: First, the Lintner model shows that the dividend smoothing degree in GCC firms is comparable to that of a developed market. Second, and importantly, the results reveal that the dividend smoothing in GCC firms is sensitive to private information of share prices. Finally, the findings indicate that information asymmetry and agency-based models affect the tendency to smooth dividends in the GCC markets.

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