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The Moderating Effect of Management Entrenchment on the Relationship between Dividend and Debt Policy with Investor Sentiment

Document Type : Research Paper

Authors

1 Assistant Professor, Allameh Tabataba'i University

2 Master's student in accounting, Allameh Tabatabai University, Tehran, Iran

Abstract

Investor Sentiment often stem from held-up beliefs or information unrelated to stock value and can lead to extreme reactions or low reactions to good or bad news in stock valuation. In this study, the effect of two important policies of Earning sharing and debt policy in the company that can be investigated on the behavior and inclinations of investors and then the Moderating effect of management Entrenchment on the relationship. To achieve the purpose of the research, four hypotheses were developed and data collected from 163 companies listed on the Tehran Stock Exchange during the years 2011 to 2021 were tested through regression models. The findings of this study showed that dividend policy increases investors' Sentiment but debt policy decreases investors' Sentiment. Management Entrenchment strengthens the positive relationship between dividend policy and investor sentiment. Therefore, during the dividend policy, the managers are of the shareholders' goals and want a higher dividend payment ratio. Management Entrenchment also reinforces the negative relationship between debt policy and investor sentiment. Therefore, risk-averse managers tend to use less debt, which is also a favorite of investors; because they invest in companies that have the least debt and their capital structure shows the importance of equity.

Keywords

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References

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Empirical Studies in Financial Accounting
Volume 19, Issue 76
March 2023
Pages 39-64
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History
  • Receive Date: 18 May 2022
  • Revise Date: 20 January 2023
  • Accept Date: 25 January 2023
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