Determinants of Corporate Dividend Policy in Jordan: An Application of the Tobit Model

This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm-level panel data set of all publicly traded firms on the Amman Stock Exchange between 1989 and 2000. The study develops eight research hypotheses, which are used to represent the main theories of corporate dividends. A general-to-specific modeling approach is used to choose between the competing hypotheses. The study examines the determinants of the amount of dividends using Tobit specifications. The results suggest that the proportion of stocks held by insiders and state ownership significantly affect the amount of dividends paid. Size, age, and profitability of the firm seem to be determinant factors of corporate dividend policy in Jordan. The findings provide strong support for the agency costs hypothesis and are broadly consistent with the pecking order hypothesis. The results provide no support for the signaling hypothesis.