Simultaneous Determination Of Stock Price Synchronicity And Dividend Payout Ratios: Evidence From The MENA Region

Abstract

This paper examines the determinants of cross-sectional differences in stock price synchronicity and dividend payout ratio in the MENA region during the period between 2003 and 2013. These variables are related not only directly, but also indirectly, through their relationship with information environment of firms. To distinguish these effects, we examine the determinants of both variables within a system of equations. Our results indicate that both of these variables affect each other negatively. We argue that higher information asymmetries associated with firms exhibiting high synchronicity leads to lower payout ratios, while lower information asymmetries that accompany firms paying high dividends lead to lower synchronicity.