Explaining Dividend Policy Based on Investors’ Behavioral Indicators: A Structural Equation Modeling Approach
Keywords:
Dividend policy, investor behavior, confidence and risk-taking, financial psychology, cognitive biasesAbstract
Dividend policy is one of the key managerial decisions that directly affects shareholder satisfaction and firm value. Understanding investors’ behavioral factors can play an important role in predicting and designing such policies. Therefore, the present study aimed to explain firms’ dividend policy based on investors’ behavioral indicators. This study employed a mixed-methods approach and was conducted in three consecutive stages. First, through qualitative analysis and the fuzzy Delphi method, the behavioral indicators affecting dividend policy were identified and refined. In the next stage, the initial conceptual model was developed and included five behavioral indicators of investors. In the third stage, five research hypotheses were tested using partial least squares structural equation modeling (PLS-SEM) and data from companies listed on the Tehran Stock Exchange during the 2014–2022 period. The findings showed that confidence and risk-taking, as well as cognitive and emotional biases, had a negative and significant effect on dividend policy, whereas social and group influences, financial psychology and risk, and financial management and decision-making had a positive and significant effect on it. These results emphasize that investors’ behavioral and psychological factors play a considerable role in determining dividend policies, and that traditional financial analysis is incomplete without considering these dimensions. The findings of this study have implications for managers and financial policymakers. It is recommended that particular attention be paid to investors’ behaviors and their cognitive and psychological biases in dividend-related decision-making.
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Copyright (c) 2025 Somayeh Sheikhalishahi (Author); Habibollah Nakhaei; Karim Nakhaei (Author)
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