scholarly journals Dividend policy and market value of banks in MENA emerging markets: residual income approach

2020 ◽  
Vol 4 (1) ◽  
pp. 25-45
Author(s):  
Akram Ramadan Budagaga
Keyword(s):  
Emerging Markets ◽  
Dividend Policy ◽  
Market Value ◽  
Residual Income ◽  
Content Type ◽  
Financial Firms ◽  
Market Values ◽  
Investment Opportunities ◽  
Income Approach ◽  
Residual Income Approach

PurposeThis study will examine the impact of cash dividends on the market value of banks listed in Middle East and North African (MENA) emerging countries during the period 2000–2015.Design/methodology/approachThe current study adopts residual income approach based on Ohlson's (1995) valuation model. By testing different statistical techniques, fixed effect is applied on panel data for (144) banks listed on 11 MENA stock markets over the period 2000–2015. Furthermore, additional tests are applied to confirm the primary results.FindingsThe analysis reveals that current dividend payouts and dividend yield do not provide information relevant to the establishment of market values in MENA emerging markets; thus, they have no material impact on MENA banks' market values. This lack of current dividend payment effect is consistent with Miller and Modigliani (1961) dividend irrelevance assumption: there is no evidence of either an informational or real cash inflow effect of current dividend payments. The findings of this study can be attributed to the fact that MENA banks may be forced to place more emphasis on allocating money for investment instead of paying dividends given them they are subject to liquidity requirements for investment, expansion, general operations and compliance with regulations. Only after all these financial needs are covered can the remaining surplus be distributed as cash dividends. Therefore, cash dividends represent earnings residual rather than an active decision variable that impacts a firm's market value. This is consistent with the residual dividend hypothesis, which is the crux of Miller and Modigliani (1996) irrelevance theory of dividends.Research limitations/implicationsThe current study is restricted to a sample of one type of financial firms, banks, because of the problem of missing data and limited information related to other financial firms for the same period. Therefore, further research could be additional types of financial firms such as insurance firms that play a vital role in MENA emerging economies.Practical implicationsThe results of this study have some important implications for banks' dividend policymakers. Dividend policymakers in MENA emerging markets seem to follow residual dividend policy, in which they distribute dividends according to what is left over after all acceptable investment opportunities have been undertaken. This makes for inconsistent and unstable dividend policy trends, making it difficult for investors to predict future dividend decisions. Further, this practice may deliver information to shareholders about a lack of positive future investment opportunities, and this may negatively affect the share value of banks.Originality/valueThis study is the first of its kind – up to the author's knowledge – that examines a large cross-country sample of MENA banks (144) to cover a long time period in the recent past, and, more importantly, after the banking sector in the region has experienced major transformations during last two decades. In addition, most of the MENA region countries included in this study, namely, banks, operate in tax-free environments (there are neither taxes on dividends nor on capital gains). This feature adds complexity to the ongoing dividend debate.

scholarly journals DETERMINING HOUSING AFFORDABILITY FOR YOUNG PROFESSIONALS IN KLANG VALLEY, MALAYSIA: RESIDUAL INCOME APPROACH

2018 ◽  
Vol 16 (6) ◽  
Author(s):  
Nor Suzylah Sohaimi ◽  
Alias Abdullah ◽  
Syafiee Shuid
Keyword(s):  
Household Income ◽  
Simple Random Sampling ◽  
Well Being ◽  
Housing Affordability ◽  
Residual Income ◽  
Urban Planner ◽  
Young Professionals ◽  
Income Approach ◽  
Klang Valley ◽  
Residual Income Approach

Underprivileged young professionals in housing affordability are prone to an adverse effect on their well-being. This article empirically examines housing affordability among young professionals aged between 25 and 35 years old who work or live in Klang Valley. Young professionals in this paper refer to young graduates with at least a Bachelor’s degree and are registered to professional institutions such as the Institution of Engineers Malaysia (IEM), Malaysian Institute of Architects (MIA), Malaysian Institute of Planners (MIP), and Royal Institution of Surveyor Malaysia (RISM). The aim of this study is to measure housing affordability based on residual income approach and to identify the attribute that affects young professionals’ housing affordability. Adequacy of household income for monthly mortgage or rent as well as other non-housing goods is reflecting for housing affordability. Attributes namely occupation, the presence of children, household expenditure, transportation cost, vehicle instalment, education loan, and household income are analysed by using binary logistic regression. 264 respondents who are either a homeowner, tenant, or parental home resident were selected by using simple random sampling. The survey data were collected through the professional institutions respectively. The study found that only presence of children, occupation of urban planner and education loan III (not taking a loan) were insignificant to the model.

Do combining value estimates increase valuation accuracy? Evidence from Indian chemical industry

2015 ◽  
Vol 5 (2) ◽  
pp. 170-183 ◽  
Author(s):  
Ranjit Tiwari ◽  
Harish Kumar Singla
Keyword(s):  
Cash Flow ◽  
Chemical Industry ◽  
Residual Income ◽  
Annual Data ◽  
Discounted Cash Flow ◽  
Content Type ◽  
Market Values ◽  
Valuation Model ◽  
Residual Income Model ◽  
Income Model

Purpose – Being a developing nation with huge opportunity of growth prospects the assessment of valuation models becomes important to have a more realistic value estimate. The purpose of this paper is to empirically examine the comparative accuracy and explanatory performance of discounted cash flow (DCF) and residual income model (RIM) valuation models for the Indian chemical industry and come up with a composite valuation model. Design/methodology/approach – To achieve the objective of the study the authors first determine the intrinsic values using both the models. Comparisons of the models are based on prediction errors and the explanatory performance of market value on value estimates. The study uses panel regression to forecast estimates of earnings and measure explanatory performance. The authors examine the ability of the value estimates to explain cross-sectional variation in the observed market values. The study also uses GMM method for deriving robust estimators. Variables for the study are collected from the CMIE’s prowess data base (release 4). The authors consider all 1,075 BSE listed chemical companies for the purpose of the study. The study uses annual data points starting from 31 March 2002 to 31 March 2011. Findings – The comparative framework shows that both Residual Income model and Composite Valuation model are superior to Discounted cash flow model and are equally likely. But since composite value estimates considers all bonafide informations of individual models, the estimates of Composite Valuation model becomes more reliable. Research limitations/implications – The study only compares and combines the two most widely used valuation models around the world. Future studies can be conducted using the third widely used valuation models, i.e. multiples and see the level of accuracy of individuals as well as the composite model. Originality/value – As a concern very few research has been conducted in this area in India. This paper provides practitioners with a snapshot of the applicability of DCF and RIM valuation models. And also shows how a composite value estimate can improve accuracy.

scholarly journals The Determinants of Corporate Dividend Policy in Poland

Ekonomika ◽  
2019 ◽  
Vol 98 (1) ◽  
pp. 96-110
Author(s):  
Justyna Rój
Keyword(s):  
Dividend Policy ◽  
Stock Exchange ◽  
Empirical Studies ◽  
Data Availability ◽  
Tobit Regression ◽  
Factors Affecting ◽  
Financial Firms ◽  
Investment Opportunities ◽  
Warsaw Stock Exchange ◽  
The Impact

[full article and abstract in English] The purpose of this research is to examine the factors that determine the dividend policy of non-financial firms listed on the Warsaw Stock Exchange (WSE) in Poland and that of the annually paid dividends. Up to now, many empirical studies related to dividend policy were carried out, showing the differentiation of factors affecting the dividend policy and their interaction. Thus, with this study, it would be possible to give a view on the dividend policy of corporations listed on the WSE for the period from 2008 to 2016. The study covers non-financial companies listed on the WSE in Poland. The Tobit regression is used to identify the impact of factors influencing the companies’ distribution of dividends. The variables that may explain a firm’s dividend decision and that were used in this study are selected based on the theory and available empirical researches and then also determined by data availability. These are profitability, investment opportunities, measures of size, leverage, and liquidity. As a result of this study, the factors that determine the dividend policy of companies were verified in the context of the companies listed on the WSE. Moreover, it indicates which of the existing theories on dividend policy could be applied to the capital markets of Poland. Thus, it provides new insights into the theory of dividend policy.

Determinants of dividend policy: evidence from an emerging and developing market

2019 ◽  
Vol 45 (3) ◽  
pp. 413-429 ◽  
Author(s):  
N. Jayantha Dewasiri ◽  
Weerakoon Banda Yatiwelle Koralalage ◽  
Athambawa Abdul Azeez ◽  
P.G.S.A. Jayarathne ◽  
Duminda Kuruppuarachchi ◽  
...  
Keyword(s):  
Dividend Policy ◽  
State Ownership ◽  
Free Cash Flow ◽  
Future Research ◽  
Dividend Yield ◽  
Short Term ◽  
Dividend Payout ◽  
Content Type ◽  
Investment Opportunities ◽  
Propensity To Pay

PurposeThe purpose of this paper is to identify the determinants of dividend policy in an emerging and developing market.Design/methodology/approachThe study employs a quantitative approach using 191 Sri Lankan firms and 1,337 firm-year observations as the sample. The authors apply a Binary Logistic Regression model to uncover the determinants of the propensity to pay dividends, and a Fixed Effect Panel Regression to investigate the determinants of dividend payout.FindingsThe authors identify past dividend decision, earnings, investment opportunities, profitability, free cash flow (FCF), corporate governance, state ownership, firm size and industry influence as the key determinants of propensity to pay dividends. In addition past dividends, investment opportunities, profitability and dividend premium are identified as the determinants of dividend payout. Moreover, there is a feedback between dividend yield and profitability in one lag and between dividend yield and dividend premium in two lags, as short-term relationships. Hence, past dividend decision or payout, profitability and investment opportunities are a common set of determinants with implications for both propensity to pay dividends and its payout. The findings support theories of dividends such as signaling, outcome, catering, life cycle, FCF and pecking order.Practical implicationsThe findings are important for investors, managers and future research. Investors should focus on the determinants identified by our study when making investment decisions whereas managers should practice the same when formulating appropriate dividend policies for their firms. Future research should rely on propensity to pay dividends and its payout simultaneously to promote a theoretical consensus on the dividend determinant puzzle.Originality/valueThis is the first study that investigates determinants of propensity to pay dividends and dividend payout along with short-term relationships in a single study.

How does energy efficiency influence the Market Value of office buildings in Germany and does this effect increase over time?

2015 ◽  
Vol 8 (3) ◽  
pp. 243-266 ◽  
Author(s):  
Markus Surmann ◽  
Wolfgang Brunauer ◽  
Sven Bienert
Keyword(s):  
Energy Efficiency ◽  
Sample Size ◽  
Small Sample Size ◽  
Market Value ◽  
Small Sample ◽  
Office Building ◽  
Content Type ◽  
Market Values ◽  
Econometric Methodology ◽  
Over Time

Purpose – The paper aims to estimate the effect of energy efficiency on the Market Value of office buildings and consider whether this effect increases over time. Design/methodology/approach – The authors analyze a dataset of office building valuations from 2009 to 2011, provided by the German Investment Property Database. The authors use hedonic regression models to determine the effect of energy efficiency and energy consumption on Market Values. Using generalized additive models (GAM) for modeling nonlinear covariate effects, the authors control for further building characteristics and location. Due to the small sample size, the authors introduce an innovative econometric approach that mitigates this problem. Findings – Mainly due to the small sample size, and in spite of the newly developed econometric methodology, the authors do not find clear evidence of the relationship between energy efficiency and the Market Value. However, the study nonetheless provides interesting insights into the composition of office building Market Values in Germany. Originality/value – In addition to the empirical results for the German office market, the main contribution of this paper lies in the econometric methodology. Beside the application of cutting-edge statistical techniques, the authors develop a method for handling datasets, for which the variable of interest is rarely observed, leveraging on the total available data. Thus, the methodology offers promising prospects for future research in similar settings.

scholarly journals The impact of innate accruals quality on the future market value moderated by dividend policy

2020 ◽  
Vol 5 (2) ◽  
pp. 269-283
Author(s):  
Muljanto Siladjaja ◽  
Yuli Anwar
Keyword(s):  
Growth Rate ◽  
Dividend Policy ◽  
Market Price ◽  
Market Value ◽  
Future Market ◽  
Observation Data ◽  
Constant Growth Rate ◽  
Content Type ◽  
Accruals Quality ◽  
The Impact

PurposeThe purpose of this study is to test and prove how the quality of innate accruals can make a significant contribution to the prospect of future market value for manufacturing industries.Design/methodology/approachThis research used multiple regression method by gathering all observation data on a go public company in the industrial manufacturing sector.FindingsThe results of this test can show that the dividend policy helps reduce the use of accruals to increase investor perceptions about the prospects of the company's future period, especially the value of earnings informativeness, including valid information about the actual fundamental conditions. These results reflect high innate accruals quality, so the use of low accruals, especially in reporting earnings.Research limitations/implicationsThis test uses a measurement of a constant growth rate with the calculation of the indicator g in the next five-year period, and the proof has secondary data abnormalities reflecting a very high level of variation in the use of accruals. As an implication of the data that is not normal, it causes a large amount of data pruning through outlier tests. Samples that qualify for processing are 180 from 384 data.Originality/valueBy calculating the value of the dividend payout with the growth rate, the estimated future market price can be done with reasonable accuracy.

Trend of hidden values and use of intellectual capital information

2016 ◽  
Vol 29 (1) ◽  
pp. 81-105 ◽  
Author(s):  
Abdifatah Ahmed Haji
Keyword(s):  
Financial Crisis ◽  
Intellectual Capital ◽  
Market Value ◽  
Annual Reports ◽  
Simultaneous Increase ◽  
Significant Positive Association ◽  
Content Type ◽  
Market Values ◽  
Mandatory Requirement ◽  
Book Values

Purpose The purpose of this study is to primarily examine the trend of hidden values and use of intellectual capital (IC) information narratives of leading Malaysian companies in the context of the recent financial crisis. The study then assesses the implications of IC information on a firm’s market value. Design/methodology/approach It examines the trend of hidden values and the corresponding role of IC information releases through analyses of archival data retrieved from Bloomberg and corporate annual reports of 153 firm-year observations across a three-year period (2008-2010). Various statistical and econometric data analyses were performed to examine the aforementioned exercises. Findings This study documents four main findings. First, the results show a significantly widening gap between market and book values during the financial crisis, with the market values consistently higher than the book values in all three years. Second, the hidden values significantly increased over time, with the increase becoming substantially higher in the years corresponding to the tail-end of the crisis. Third, the findings indicate that an increase in the hidden values results in a simultaneous increase in IC disclosures, with firms using IC information to inform and reflect their hidden values. Finally, it is shown that the overall amount of IC disclosures, and in particular human capital information, has a significant positive association with hidden values and, consequently, the market value of the companies. Practical Implications For IC researchers, the study shows the existence of a substantial amount of hidden values in the corporate landscape; thus, there is a need to actually uncover the pattern and creation of hidden values within firms through action research. For businesses, the study reveals the importance of releasing IC information narratives to a firm’s value creation process. The results are also important for policymakers in promoting integrated corporate reporting framework to report IC resources of a firm, perhaps a policy extending the recent mandatory requirement of corporate social responsibility (CSR) reporting in Malaysia. Originality/value This study presents a rare empirical assessment of the trend of hidden values and use of IC information narratives in the context of a recession. The findings can benefit companies and regulators in getting to know a growing level of hidden values – as well as the usefulness of IC information.

Compensation study of Boboroku, Jesse, Delta State, Nigeria

2017 ◽  
Vol 35 (5) ◽  
pp. 490-507 ◽  
Author(s):  
Christopher Oghenegweke Odudu ◽  
Patience Osaiwie Iruobe
Keyword(s):  
Market Value ◽  
The Body ◽  
Oil Well ◽  
Case Study Methodology ◽  
Content Type ◽  
Market Values ◽  
Full Compensation ◽  
Compensation Claims ◽  
Compulsory Purchase

Purpose The purpose of this paper is to examine issues of compulsory acquisition, evaluating the quantum of compensation paid to natives of communities whose farmlands are acquired and issues that must be dealt with to provide adequate compensation to claimants. Design/methodology/approach Using an oil well acquisition base in Boboroku, Jesse in Ethiope-West local government area of Delta State as a case study, various compensation claims were examined vis-à-vis market value claims in compulsory acquisition. Findings It was found that many claimants received N1,000.00 (naira) or less as full compensation claims for their crops while families lucky to own lands received more reasonable payments. It was also found that 40 of the 142 claimants in Boboroku community received only N4,146,120.00 as opposed to N8,802,750.00 they should have received under market values. Similarly, 39 claimants in Okuno should have received a market value of N3,195,920.00 as against N1,370,609.00 that was actually paid by the acquiring authority confirming that the rates applied were grossly inadequate. Practical implications It was established that there was no statutory provision for disturbance losses from revocation of land interests. Also, the productivity of economic crops and trees was not considered nor was the computation of claims based on market values. The paper further established that claims should be compensated on the basis of productivity value and life span of interests being acquired and not on arbitrary rates supplied by the acquiring authorities. Originality/value The case study methodology used in this paper enabled contribution to the body of studies which hitherto highlighted the issues of compulsory acquisition and quantum of compensation. It, therefore, adds to the problem-solving framework on compulsory purchase matters in Nigeria.

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