The Impact of Product Market Competition on Firm's Dividend Policy

This paper investigates the relation between product market competition and managers’ decision to distribute cash dividend to shareholders. Therefore، the Herfindahl-Hirschman، Lerner، and Modified Lerner indexes were employed as a proxy for product market competition. The research population composes of 67 companies listed on Tehran Stock Exchange which have been studied during the years 2004 to 2010. Multivariate linear regression statistical analysis was used to test the hypotheses of the research. The results of the study indicate that firms located in more competitive industries would pay lesser dividends than firms in the less competitive markets. The results in this paper seem to support the «Substitution Model» and the «Opposing Outcome Model» and «Predation Hypothesis». Furthermore، based on analysis of variance، type of industry is an effective factor on product market competition.