Abstract

The study aims to know the relationship between dividend policy, cash flow and investment of firms. For this, 100 firms from stock Tehran exchange during 2002-2008 were investigated. In this research the year 2006 is the base year of dividend policy identification. The firms were divided into three kinds: Dividend increase, dividend decrease and no dividend change. The results of Wilcoxon test showed that there is a significant relation between dividend payment policy and cash flow, operating income, leverage ratio, and tangible fixed assets. The Regression test results revealed that the next two years income has not a significant effect on the changes of dividend of the base year, but two previous years income had effect on it. Further, the Regression test results showed that Tobin q ratio, cash flow, dividend, dividend announcement and change in liabilities have a significant effect on level of investment. On the contrary, growth rate and paid-in capital have no significant effect on level of investment.

Abbreviation

JEL classification: G32; G35