The Relationship between Dividend Policy and Trading Volume in Tehran Stock Exchange

Dividend payout decision making and amount of it is an important issue in the corporate finance, because in this decision making the amount of money which should be paid to the investors and should be retained for investment will be determined. In a market with no trading friction, rational investors with liquidity needs can choose between dividend and selling stocks at no cost. In this article the relationship between trading volume considering free float as liquidity criterion with the amount of dividend payout is investigated and the firm characteristics such as size, profitability and growth opportunities are controlled. The result of the linear regression model shows that the investors in Tehran Stock Exchange (TSE) do not consider stock turnover rate as a variable which explains the amount of dividend. Also, the relationship between size and growth opportunities with dividend has not been confirmed; but profitability has a positive significant relationship with dividend. In other hand, investors in TSE use the profitability as a criterion for determining the dividend. <br />