The Role of Dividend Policy and Financial Reporting Quality in Shaping Investment Strategies: Evidence from Tehran Stock Exchange

Abstract

This research investigates the dynamic interaction between dividend policy and financial reporting quality (FRQ) in shaping corporate investment strategies. Dividend policy, a cornerstone of financial management, serves as a signal of a firm’s financial health, while FRQ ensures the reliability of these signals. The study focuses on firms listed on the Tehran Stock Exchange (TSE), analyzing data from 112 companies over five years (2018–2022).

The findings reveal a nuanced relationship: high dividend payouts often limit internal funds available for investment but signal financial stability, attracting external investors. Meanwhile, FRQ moderates this relationship by enhancing the transparency and credibility of financial statements. Through moderated regression analysis, the study highlights how these factors collectively influence investment efficiency, offering critical insights for firms operating in emerging markets characterized by weak governance frameworks.