【文章內(nèi)容簡介】 scussed by Rajan. The key features instead are the existence of a track record and a public reputation. In stark contrast to bank debt, bond investors tend to rely heavily on public information reflected in bond ratings, a history of dividend payments, and simple financial ratios. In such a context the premitment to pay dividends may be more important than for a firm relying solely on bank debt, particularly when many institutions are restricted to investing in the public debt of dividend paying firms only. Consequently, dividend policy may be a more useful premitment and signaling mechanism in financial systems that are more heavily reliant on arms length transactions. We term this role for dividend payments the substitute hypothesis, in the sense that the dividends substitute for direct munication with the external investors in the firm, both debt and equity. This substitute hypothesis implies that there should be significant differences in dividend policy across countries with different institutional structures. In particular, dividend policy should be more important for firms operating in arms length capital markets, rather than in ‘‘internal’’ bank centric markets. Dewenter and Warther (1998) made a similar point when they argued that stable dividend payments may not be as important for firms in Japan that are part of a ‘‘Keiretsu’’ work, due to the close ties between managers and investors. In contrast to the substitute hypothesis, one could argue that dividends reinforce rather than substitute for other mechanisms in controlling agency and information problems. We term this the plement hypothesis. La Porta et al(1998) argue that the lack of transparency, inadequate legal infrastructure, and weak investment protection in emerging markets all enhance the role of dividends as a reputation mechanism. In this case, and despite the close banking relations and closely held nature of the firms, the payment of a dividend is necessary to attract capital. With the substitute hypothesis we would expect dividends to be more predictable in arms length capital markets to provide the assurance to external investors that the firm’s operations are sound. In contrast, in bank centric markets we would expect this munication to be immediate and the dividends to reflect the firm’s unpredictable internal cash flow. In particular, we test 1) Do firms in these emerging markets have less predictable dividend payments than firms in the USA? and 2) Are dividends for firms in emerging markets less sensitive to past dividends and more sensitive to current earnings than US firms? We know that Lintner style dividend smoothing characterizes the policy of many US firms and that this stems from an arms length capital markets perspective. With the substitute hypothesis we would not expect Lintner’s model to hold as well for emerging market firms. These hypotheses are interrelated, but if we find the answer is generally yes, we take this as support for the ‘‘substitute’’ theory of dividend policy. On the other hand, if we find that dividend policy in these emerging markets is predictable and can be characterized quite accurately by a Lintner model, we take this as support for the ‘‘plement’’ theory of dividend policy. Table 4 provides summary statistics on dividend policy and some key financial ratios for panies in each of our eight emerging countries and the USA. Since all the values are ratios, they are sometimes skewed when dividing by small numbers. For this reason the median and mean are both reported, along with the standard deviation. As well, all observations lying outside three standard deviations from the mean were removed. The standard ratios for analyzing dividend policy are the dividend yield, which in this case is the annual dividend divided by the average of the year’s high and low stock price, and the dividend p