Corporate Payout Policy in Turkey: Does Market Power Affect the Dividend Payout?

Abstract

The primary purpose of this paper is to explore the relationship between corporate dividend-payout policy and thecompetition in the product market for the listed companies in Turkey using a panel data of non-financial firms overthe period 2007 to 2015. Turkey is an emerging market classified as a French-civil-law country with weak protectionof investors. Using Turkish firms, we analyze the effect of competition on dividend-payout policy, under weak investorprotection. Our results indicate that competition measured by the Herfindahl-Hirschman Index and 5-firm concentrationratio significantly affects dividend payout. Our findings show that competition in the industry negatively influencesthe dividend payout. The results demonstrate that in highly competitive industries, Turkish firms pay lower dividendsthan the firms in concentrated industries to remain competitive in the market. Moreover, large profitable firms withlower investment opportunities and lower tangible assets distribute higher dividends to their shareholders in Turkey.