Reputation building and the lifecycle model of dividends

We analyze the relationship between corporate dividend policy and firm lifecycle in a low-disclosure regime, where domestic firms have an incentive to use dividends to build capital market reputation among external investors. We use a range of lifecycle indicators from the extant literature and find that, as predicted by the lifecycle model, dividend payouts increase along the lifecycle until peaking in the mature stage. Furthermore, dividends are positively related to growth opportunities. In all lifecycle stages, firms with relatively larger growth opportunities pay relatively larger dividends. We find that firms in low-disclosure regimes, engage in reputation-building behaviour, not just in the early stages of their lifecycle but also in the mature stage.