Pastor and the book-to-market factor; the market

Pastor and Stambaugh (2003) suggest that assets with high
positive sensitivity of returns to aggregate liquidity result in a
disproportionate decline in investor welfare when aggregate liquidity is low,
the reason is that lower liquidity results in costlier liquidation and investors
have higher marginal utility of wealth during wealth crisis. The investor is
expected to demand dividend-paying stocks which is higher in states with low
aggregate liquidity compared to non-paying stocks, allowing them to avoid
market trading friction. The dividend initiations lead to reduction in the
sensitivity of firm value to aggregate liquidity. The Fama and French (1993)
demonstrate the three-factor model comprising the market factor, the size
factor and the book-to-market factor; the market factor is the return of the
value-weighted CRSP portfolio minus the risk-free rate, the size-factor is the
difference in returns between large and small stocks and the book-to-market
factor is the difference in returns between stocks with low versus high book-to-market
ratios. The four-factor model (Fama and French three-factor plus a momentum
factor) includes a momentum factor evidenced by Jagadeesh and Titman (1993)
demonstrating that past performance is positively related to future
performance. Pastor and Stambough (2003) present the liquidity factor based on
the idea that order flow induces greater return reversals when liquidity is
lower. It is evidenced that the pre-dividend firm value increases in liquid
markets and decreases in less liquid markets, the firm values are inversely
related after the companies initiate dividend payments. Pastor and Stambaugh
(2003) indicate that for individual stocks, liquidity betas are significantly
positively correlated over time. The liquidity betas of non-initiating firms are
negative, like the betas of dividend-initiating firms after dividend
initiation. Likeably, firms with higher liquidity risk are more likely to
initiate dividends than firms with lower liquidity risk. The sensitivity of
stock returns to aggregate liquidity declines after dividend initiations. Firm
value increases in states after dividend initiations characterized by low
aggregate liquidity and high marginal utility of wealth. The reduced liquidity
risk lowers expected returns by economically significant amounts. The overall
results indicate that stock market liquidity and cash dividends act as
substitutes from investor’s perspective.

2.5 Other factors/ variables (if any)

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2.6 Major Conclusions

2.7 Theoretical framework

2.8 hypothesis

2.8.1      H1:         profitability have a positive
relationship with dividend policy

2.8.2      H1?:       profitability have no impact on the
dividend policy

2.8.3      H2:         Debt have a negative relationship with
dividend policy

2.8.4      H2?:       Debt have no impact on dividend policy

2.8.5      H3:         Liquidity have a positive relationship
with dividend policy

2.8.6      H3?:       Liquidity have no impact on dividend



3.      Research Methodology

3.1    Sampling Method

the sampling method used the study the simple random

3.1.1 Population

The population size is 18 listed companies from the sector

3.1.2 Sample Size

The   sample size in
this study is 15 listed companies of the cement sector