Companies` Financing with Regard to Dividend Smoothing Decisions (Evidence from Emerging Capital Markets)

This study focuses on the analysis of the capital structure formation with regard to dividend smoothing policy. Considering the large public companies from the BRIC countries and the United States, it was found that the highest ordinary shares dividends stabilization exists among Chinese and American firms, while the the hypothesis about their smoothing was rejected for the Brazilian market. It is possible to speak about the firms preferences to apply short-term debt to finance stable dividend policy for the United States only. In other countries, firms reduces the amount of loans with the dividend payments increase. The problem of information asymmetry was also detected in the study for all five markets. Firms from BRIC countries replace the dividend smoothing policy by debt, using it as a tool to signal its stable financial condition. American firms prefer to deal with this problem through dividend smoothing.