Previous Issues

The Primary Focus of prior empirical studies on dividend payment practices has been on major industrial countries such as the U.S. (see for example Lintner (1956) and Fama and Babiak (1968), Japan (see Nakamura and Nakamura  (1985) and Canada (see Morgan and Saint-Pierre (1978).  While it is important to understand the dividend payment practices in the major industrial countries, it will also be worthwhile to investigate how firms in smaller countries with different economic settings behave with respect to dividend payments.

The purpose of this study is to examine the dividend payment behavior of firms that are traded on the Kuwait stock Exchange.  Our empirical analysis is based primarily on the economic specifications of dividend policies by Lintner (1956).

The variants of the Lintner model developed by Fama and Babiak (1968) and Nakamura and Nakamura (1985) are also investigated.  The findings of our study indicate that dividend payments by the publicly- traded firms in Kuwait can be explained by current earnings and lagged dividends as suggested by Lintner (1956).

Furthermore, lagged earnings have a negative relationship with change in dividends supporting the rational expectations model of Nakamura and Nakamura (1985).  Our analysis also indicates that these results are more likely to hold in the post Gulf years and for financial firms.