Investigating the time delay in dividend payment and its related factors in the Iranian stock market

Objective: The time delay in dividend payment signifies the duration from the dividend's approval to its deposit into shareholders' accounts. This delay tends to be of particular concern to shareholders and takes on greater importance in an inflationary economic climate. This research aims to investigate the trend of this time delay in dividend payment and identify the factors that contribute to payment delays. Given the high inflation rate in Iran and that cash dividends are distributed just once a year, there's an increased need for research in this field. According to Article 240 of Iranian Commercial Law, companies are obligated to pay cash dividends within a maximum of eight months from the date of the shareholder meeting approving the dividend. However, as per Notice No. 122/125074 issued by the Tehran Stock Exchange(TSE) in 2023, it's been stipulated that listed companies in the Iranian stock market must disburse dividend payments within a maximum of four months following the general assembly's decision on dividend distribution. In a context where the time value of money is significant and legal obligations for dividend payment become stricter, the time delay in disbursing dividends can be viewed as a component of a company's dividend payment strategy. Our hypothesis is that this delay varies across industries, influenced by the distinct business models each industry employs. As a company reaches the maturity phase of its life cycle, it's likely to experience a shorter delay in dividend payments due to enhanced financial strength and operational stability. Moreover, we predict a decrease in this payout delay in response to an increase in liquidity measures, firm size, return on assets, and earnings quality. On the other hand, a rise in financial leverage and free float shares is likely to cause an elongation in the delay of dividend payments.



Methods: This study is a correlation-based and comparative investigation that utilizes retrospective data. The research population comprises companies from 12 chosen industries listed on the Iranian stock market. The sample was obtained using a systematic elimination method, resulting in 1311 observations, represented as an unbalanced panel over eight years, from 2014 to 2021. The Eviews12 and Stata17 software suites were used for performing statistical analyses. Testing of hypotheses was carried out using mean comparison tests and multivariate regression models, incorporating a methodology to adjust for the influences of industry and year.



Results: The study results demonstrate a decline in the dividend payment time delay in the Iranian stock market from the years 2014 to 2021. Throughout this timeframe, companies with a higher quantity of shares were found to have shorter delays in dividend payments. Industries including petroleum products, computers and related services, and chemicals showed the shortest delay in dividend payments. Conversely, the ceramic and tile industry, machinery and equipment, and pharmaceutical sectors exhibited the longest delays in delivering dividends. Out of all 66 pairwise industry comparisons, the average difference in the dividend payment time delay is significant in 56 paired groups, which accounts for approximately 84.85% of the comparisons at both 99% and 95% confidence levels. This suggests a distinct variation in the time delay of dividend payments across different industries. Additionally, in 10 pairwise comparisons among the corporation life cycle - introduction, growth, maturity, shake-out, and decline - the average time delay in dividend payment is notably different in 6 paired groups. The delay in dividend payments is less during the maturity stage compared to other stages of the company's life cycle. Conversely, the time delay in the decline stage surpasses that in the growth, maturity, and shake-out stages. The delay in dividend payments shares a negative correlation with both the company's liquidity and size. On the contrary, it exhibits a positive correlation with financial leverage and the quantity of free float shares. No significant association was discerned between the dividend payment time delay and variables such as asset returns and earnings quality. However, a notable discrepancy was detected in the average of these two variables within the range from the minimum to the first quartile of the dividend payment time delay distribution compared to the remaining range of the distribution.



Conclusion: The dividend payment delay may arise from strategic decisions by management that prioritize funding for the company's operations and projects, the influence of the company's ownership structure, or limitations linked to the firm's liquidity capabilities, macro industry conditions, and economic variables. These elements are manifested in the financial ratios within financial statements and the variables explored in this research. Grasping the interplay between these variables and the delay in dividend payments equips investors with the capability to estimate the length of the delay in a company's dividend payments, and to benchmark it against other companies using this measure. The outcomes of this study equip investors with the ability to strategize their investment portfolios taking into account the industry type, the company's life cycle stage, and other variables examined in the research. Based on the duration of the dividend payment delay, investors may favor acquiring shares in certain companies over others, or they might decide to offload their shares before the dividend disbursement date. This investigation not only broadens the existing literature concerning dividend payment delay but also pioneers the exploration of this subject.