The Effect of Defensive and Prospective Business Strategies on Cash Dividend Payments: The Moderating Role of Free Cash Flows and Financial Constraints

Dividend policy is one of the most important financial decisions of firms, influenced by various factors such as financial conditions, growth opportunities, and strategic characteristics. Among these factors, a firm’s business strategy can serve as a fundamental determinant that shapes managers’ behavior in allocating cash resources and affects dividend payout decisions. This study examines the impact of defensive and prospecting business strategies on cash dividend payouts, considering the moderating roles of free cash flow and financial constraints. For this purpose, data from ۱۴۵ firms listed on the Tehran Stock Exchange over the period ۲۰۱۳–۲۰۲۳ were analyzed. The hypotheses were tested using linear regression and panel data analysis while controlling for year and industry effects. The results indicate that the prospecting strategy has a negative and significant impact, whereas the defensive strategy has a positive and significant impact on the cash dividend payout ratio. Moreover, free cash flow weakens the negative relationship between prospecting strategy and cash dividend payout but has no significant moderating effect on the relationship between defensive strategy and dividend payout. Similarly, financial constraints reduce the negative effect of prospecting strategy on dividend payout but do not moderate the relationship between defensive strategy and dividend payout. Overall, the findings suggest that dividend policy is not only a function of firms’ financial characteristics but also reflects their business strategy type and the normative pressures of the capital market.

کلیدواژه ها:

Prospective Strategy ، defensive strategy ، Dividend payout ratio ، Free Cash Flows ، financial constraints