Dividend policy: a review

Purpose This paper aims to briefly review principal theories of dividend policy and to summarize empirical evidences on these theories. Design/methodology/approach Major theoretical and empirical papers on dividend policy are identified and reviewed. Findings It is found that the famous dividend puzzle is still unsolved. Empirical evidence is equivocal and the search for new explanation for dividends continues. Also a number of stylized empirical facts about dividends discovered by researchers are noted. Research limitations/implications As with any review paper, the major limitation is that necessarily some papers will be left out. Also as newer research is published the review paper will become more dated. Originality/value This paper will give the reader a comprehensive understanding of the dividend puzzle and the major paradigms of dividend policy. The paper will also give the reader the major stylized facts about dividend policy.