On the dividend smoothing, signaling and the global financial crisis

- We examine dividend smoothing, signalling and the global financial crisis (GFC).
- The study uses one of the GCC countries as a case study, namely Oman.
- We estimate the modified Lintner model by incorporating Tobit structure.
- Results support dividend smoothing and signalling.
- The GFC has no impact on dividend policy in the case of Oman.

This paper addresses twin problems related to dividend smoothing and signaling. Firstly, it provides direct test for dividend smoothing and signaling. Secondly, this paper attempts to examine the impact of Global Financial Crisis (GFC) on dividend stability. The paper estimates the Lintner model by incorporating Tobit structure using ten years longitudinal data of firms listed on the Muscat Securities Market. An empirical case study is conducted to demonstrate the usefulness of the model. Our empirical results validate both the original and the modified Lintner model, which is consistent with the signaling hypothesis. The paper finds that the impact of GFC on dividend policy is insignificant. Moreover, the evidence lends support to the substitute model of agency costs theory.