The Financial Flexibility Piece in the Dividend Puzzle - A Study of Firms Listed in Sweden

The purpose of this master thesis is to examine in which way dividend policies are affected by managers strive for financial flexibility in listed Swedish firms. The underlying reason for the thesis is to attain a broader knowledge regarding dividend policies. Since present theories do not provide a satisfactory explanation or are not satisfactory tested, we find it relevant to perform a study within this field. Hypotheses are generated and the means of these tests are compared using independent sample t-test. Further, a panel data multivariate regression is used to control for time trends. Theoretical framework consists of signaling theory regarding dividends, free cash flow hypothesis and financial flexibility. Our study shows that financial flexibility is a piece of the dividend puzzle and therefore managers who value financial flexibility do incorporate this when deciding dividend policy