Abstract:

Dividend policy decisions which are major determinant of firm capital structure can affect the financial structure of the company. Capital gains and dividend payments are two types of return for investors in capital market. The shareholders have the right to claim dividend payments over a firm`s profit. On the other hand, in terms of financing decisions dividend policy can be considered as cost of capital for a firm. Hence, dividend policy is major issue for both investors and companies. The purpose of this study is to analyze the affect of economic crisis over dividend policy in Istanbul Stock Exchange (ISE). The analyses consist of two steps. The first step involves the estimation of payout ratio and speed of adjustment coefficient defined in Lintner`s model (1956); and the second step investigates the structural breaks on market`s dividend policy via Chow Test. The results show that there is not a stable dividend payout ratio over the period 1986-2010. Furthermore, economic crisis during 1998 – 2001 period resulted a major structural change on dividend policy in ISE.

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