The dividend paying decisions in the context of behavioral corporate finance: The case of BİST

The main purpose of this research is to investigate the cash dividend paying decisions of the firms in the context of behavioral corporate finance. In line with this aim, two basic approaches in behavioral corporate finance which are rational investors-irrational managers and irrational investors-rational managers are followed. The role of herd behavior and overconfidence on dividend paying decisions are analyzed under the rational investor-irrational manager approach. The validity of catering theory is analyzed under the irrational investor-rational manager approach. The data used for the study was obtained for the period of July 1999 - June 2014 from the 77 Turkish manufacturing firms which are listed at BIST Stars. The Two Stage Least Square and the Panel Logistic Regression Analysis are utilized as the methods of the study. The results indicate that managers show herd behavior but not overconfidence for the cash dividend paying decision under the rational investor-irrational manager approach. On the other hand, it is found that the catering theory is not valid under the irrational investor- rational manager approach. Besides, firm profitability, past dividend paying decisions, total asset value, liquidity ratio, and idiosyncratic firm return have positive effects on the dividend paying decisions of managers. However, leverage and peer firms' asset value have negative effects on the dividend paying decisions of the firms. This work dealt with the issue of cash dividend paying decisions with a new approach and found out that managerial behavioral biases have some effects on those decisions. This work, on the other hand, will be a very important source in behavioral corporate finance as a new research area for the Turkish literature. Keywords: Behavioral Corporate Finance, Dividend Paying Decisions, Herd Behavior, Overconfidence, Catering Theory