This research aimed to discover the relation between retained earnings and earnings growth of corporations listed in Istanbul Stock Exchange. While commonsense awaits positive relationship recent researches, made on this topic, yield interesting and conflicting results. The academic community found control function of dividends as the most reasonable explanation. In developed countries, for instance, the US, dividends helped to decrease agency cost. For Istanbul Stock Exchange companies the result is no different. Retained earnings didn’t have a significant positive contribution so far. Still, there are some signs of agency costs and dividends seem to be an indication of good industry and good company.