The Determinants of Dividend Policy by Information Technology (IT) Firms in the United States

Abstract

This paper examines the determinants of dividend payout policy of seventy publicly traded information technology (IT) firms in the United States in 2017. More important, the standard dividend payout ratio is adjusted to include depreciation because IT firms have higher depreciation than the services sector. Thus, this higher depreciation rates may have an impact on dividend payouts by IT firms. To find out the determinants of dividend payout policy, general linear models (GLM) were estimated using for standard dividend payout and the adjusted dividend payout as the dependent variables. In the standard dividend payout regression, corporate tax and the market to book ratio have a positive relationship with the dividend payout. Operating cash flow, corporate profit, debt to equity ratio, size and sales has a negative relationship with dividend payout. Finally, the regression for the adjusted standard dividend payout showed the corporate tax, operating cash flows, profit and the market to book ratio have a positive relationship with the adjusted dividend payout. Debt to equity ratio, size, and sales has a negative relationship with adjusted dividend payout.