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.

The impact of board composition and ownership structure on dividend payout policy: evidence from Saudi Arabia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Helmi A. Boshnak
Keyword(s):  
Saudi Arabia ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Payout Policy ◽  
Board Composition ◽  
Dividend Payout ◽  
Content Type ◽  
Listed Firms ◽  
Propensity To Pay ◽  
The Impact

PurposeThis study examines the impact of board composition and ownership structure variables on dividend payout policy in Saudi Arabian firms. In particular, it aims to determine the effect of board size, independence and meeting frequency, in addition to chief executive officer (CEO) duality, and state, institutional, managerial, family, and foreign ownership on both the propensity to pay dividends and dividend per share for Saudi-listed firms over the period 2016–2019.Design/methodology/approachThe paper captures dividend policy with two measures, propensity to pay dividends and dividend per share, and employs a range of regression methods (logistic, probit, ordinary least squares (OLS) and random effects regressions) along with a two-stage least squares (2SLS) model for robustness to account for heteroscedasticity, serial correlation and endogeneity issues. The data set is a large panel of 280 Saudi-listed firms over the period 2016 to 2019.FindingsThe results underline the importance of board composition and the ownership structure in explaining variations in dividend policy across Saudi firms. More specifically, there is a positive relationship between the propensity to pay dividends and board-meeting frequency, institutional ownership, firm profitability and firm age, while the degree of board independence, firm size and leverage exhibit a negative relation. Further, dividend per share is positively related to board meeting frequency, institutional ownership, foreign ownership, firm profitability and age, while it is negatively related to CEO duality, managerial ownership, and firm leverage. There is no evidence that family ownership exerts an impact on dividend payout policy in Saudi firms. The findings of this study support agency, signalling, substitute and outcome theories of dividend policy.Research limitations/implicationsThis study offers an important insight into the board characteristic and ownership structure drivers of dividend policy in the context of an emerging market. Moreover, the study has important implications for firms, managers, investors, policymakers, and regulators in Saudi Arabia.Originality/valueThis paper contributes to the existing literature by providing evidence on four board and five ownership characteristic drivers of dividend policy in Saudi Arabia as an emerging stock market, thereby improving on less comprehensive previous studies. The study recommends that investors consider board composition and ownership structure characteristics of firms as key drivers of dividend policy when making stock investment decisions to inform them about the propensity of investee firms to pay dividends and maintain a given dividend policy.

scholarly journals Analysis of the determinants of dividend policy: evidence from manufacturing companies in Tanzania

2018 ◽  
Vol 2 (1) ◽  
pp. 18-30 ◽  
Author(s):  
Manamba Epaphra ◽  
Samson N. Nyantori
Keyword(s):  
Regression Models ◽  
Dividend Policy ◽  
Manufacturing Companies ◽  
Business Risk ◽  
Dividend Yield ◽  
Dividend Payout ◽  
Return On Equity ◽  
Book Value ◽  
Investment Opportunities ◽  
Retained Earnings

This paper examines the determinants of dividend policy of manufacturing companies listed on the Dar es Salaam Stock Exchange in Tanzania. Two measures of dividend policy namely, dividend yield and dividend payout are examined over the 2008-2016 period. In addition, three proxies of profitability namely return on assets ratio, return on equity ratio, and the ratio of earnings per share are applied in separate specifications. Similarly, investment opportunities are measured using the ratio of retained earnings to total assets and market to book value ratio. Other explanatory variables are liquidity, business risk, firm size, firm growth and gearing ratio. For inferential analysis, 12 regression models are specified and estimated depending on the measurements of dividend policy, profitability, and collinearity between retained earnings to total assets and market to book value ratios. Empirical results show that the determinants of dividend policy vary across the proxies of dividend policy, profitability and investment opportunities. On one hand, return on equity, retained earnings to total assets ratio, market to book value ratio, business risk and size of the firms tend to have a significant effect on dividend yield. On the other hand, liquidity, business risk, and retained earnings to total assets ratio seem to affect dividend payout. Meanwhile, return on asset ratio tends to have an effect on both dividend yield and dividend payout when excluding liquidity in the regression models. Overall, dividend yield as a measure of dividend policy and return on equity as measure of profitability provide better results. The main implication of these results is that managers should consider the major determinants of dividend yield ratio while formulating the appropriate dividend policy for a firm.

Corporate social responsibility and dividend policy: a strategic choice in family firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Fayyaz Sheikh ◽  
Aamir Inam Bhutta ◽  
Bareera Rehman ◽  
Muhammad Bazil ◽  
Ali Hassan
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Dividend Policy ◽  
Family Firms ◽  
Family Members ◽  
Dividend Payout ◽  
Content Type ◽  
Corporate Social ◽  
Propensity To Pay ◽  
The Relationship

PurposeThe purpose of this study is to examine whether corporate social responsibility (CSR) affects dividend policy (the propensity to pay dividends as well as the dividend payout ratio) and what role family ownership plays in this regard in an emerging market.Design/methodology/approachThe study uses a sample of 1,480 observations from Pakistan for the period 2010–2016 and accounts for Hackman self-selection bias and endogeneity issues using a robust regression analysis. CSR activity is measured by CSR score developed through a content analysis of firms' annual reports.FindingsThe study finds that the greater number of CSR activities increases the propensity to pay dividends, but reduces the dividend payout in dividend-paying firms. On the other hand, in family firms, the greater number CSR activities decreases the propensity to pay dividends, but increases the dividend payout in dividend-paying firms. The findings hold for a series of robustness and sensitivity checks, for example, alternative measures, specifications and estimators.Practical implicationsA trade-off between firms' CSR activities and dividend policy needs to be the point of concern for investors, minority shareholders and policy makers. The role of the non-executive and independent directors becomes more important, especially in the family firms where family members sitting on the boards may drive CSR activities in their own interests opportunistically. The potential opportunistic behaviour of family members warrants the need for policy reform initiatives to strengthen the protection of other stakeholders' interests.Originality/valueThe study highlights that family owners' efforts to preserve their socio-emotional wealth in family firms affect the relationship between CSR activities and dividend policy. Further, the relationship between CSR and dividend policy in emerging markets is different from developed markets. This study simultaneously focuses on both the propensity to pay dividends and the amount of dividend payment and documents that the implications of CSR are different for them.

scholarly journals The effect of ownership structure on dividend policy: evidence from Turkey

2016 ◽  
Vol 16 (1) ◽  
pp. 135-161 ◽  
Author(s):  
Basil Al-Najjar ◽  
Erhan Kilincarslan
Keyword(s):  
Family Involvement ◽  
Financial Institutions ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Dividend Yield ◽  
Minority Shareholders ◽  
Foreign Investors ◽  
Dividend Payout ◽  
Content Type ◽  
Listed Firms

Purpose This paper aims to investigate the impact of ownership structure on dividend policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family involvement (through ownership and board representation), non-family blockholders (foreign investors, domestic financial institutions and the state) and minority shareholders on dividend decisions in the post-2003 period as it witnesses the major economic and structural reforms. Design/methodology/approach The paper uses alternative dividend policy measures (the probability of paying dividends, dividend payout ratio and dividend yield) and uses appropriate regression techniques (logit and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 Istanbul Stock Exchange-listed firms (non-financial and non-utility) over a 10-year period 2003-2012. Findings The empirical results show that foreign and state ownership are associated with a less likelihood of paying dividends, while other ownership variables (family involvement, domestic financial institutions and minority shareholders) are insignificant in affecting the probability of paying dividends. However, all the ownership variables have a significantly negative impact on dividend payout ratio and dividend yield. Hence, the paper presents consistent evidence that increasing ownership of foreign investors and the state in general reduces the need for paying dividends in the Turkish market. Research limitations/implications Because of the absence of empirical research on how ownership structure may affect dividend policy and the data unavailability for earlier periods in Turkey, the paper cannot make comparison between the pre-and post-2003 periods. Nevertheless, this paper can be a valuable benchmark for further research. Practical implications The paper reveals that cash dividends are not used as a monitoring mechanism by investors in Turkey and the expropriation argument through dividends for Turkish families is relatively weak. Accordingly, the findings of this paper may benefit policymakers, investors and fellow researchers, who seek useful guidance from relevant literature. Originality/value To the best of the authors’ knowledge, this paper is the first to examine the link between ownership structure and dividend policy in Turkey after the implementation of major reforms in 2003.

scholarly journals DIVIDEND POLICY DECISIONS AND SHARE PRICES RELATIONSHIP

2020 ◽  
Vol 2 (2) ◽  
pp. 76-81
Author(s):  
Shamik Tiwari ◽  
Debajyoti Pal
Keyword(s):  
Cash Flow ◽  
Trading Volume ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Free Cash Flow ◽  
Dividend Yield ◽  
Stock Trading ◽  
Dividend Payout ◽  
Policy Influence ◽  
Share Prices

Dividend policy is about a company’s decision related to the retention of profit and distribution of profit. In this study, the objective is to understand the effects of dividend policy on share prices for the selected companies in the Indonesian stock exchange. The findings of the study are that higher dividend yield stocks along with higher pre-tax risk adjusted returns give investor some compensation for the disadvantageous position of tax return. The findings are matching with the Brennan’s model (Brennan, 1970). The findings of the study also pointed out that increase in a company’s stock trading volume influence the share prices and investors who wanted current investment income owned shares in high dividend payout firms. Free cash flow is causing conflict between management and shareholders and this is another important finding of the study. Overall, results shows that a company’s dividend policy influence its share prices.

Intra‐industry conformity in dividend policy

2011 ◽  
Vol 37 (6) ◽  
pp. 492-516 ◽  
Author(s):  
Tom Van Caneghem ◽  
Walter Aerts
Keyword(s):  
Dividend Policy ◽  
Current Knowledge ◽  
Future Research ◽  
Institutional Research ◽  
Dividend Payout ◽  
Content Type ◽  
Focal Firm ◽  
The Usa ◽  
Industry Practice ◽  
The Impact

PurposeThe purpose of this paper is to study the impact of intra‐industry conformity tendencies on dividend policy among a large sample of US firms.Design/methodology/approachThe paper explores mimetic influences on dividend policy. Consistent with prior institutional research, the paper measures mimetic pressures as institutional prevalence or the pervasiveness of a feature of dividend policy within a firm's relevant environment.FindingsThe results reveal a significantly positive relationship between the lagged density of firms in the industry that pay a dividend and the probability of a focal firm paying a dividend. Moreover, for firms paying a dividend, results indicate that higher similarity in dividend payout among firms in the same industry induces more conformity between a focal firm and average industry practice. Overall, results are consistent with imitation in dividend policy.Research limitations/implicationsThe results support the view that future research on dividend policy should value social and behavioral factors more explicitly in order to arrive at a more overall and consistent explanation of firms' dividend policy. Moreover, the results also illustrate the relevance of alternative theories in explaining dividend policy.Practical implicationsThe results show that intra‐industry benchmarking of dividend policy plays a significant role in the USA.Originality/valueThis study documents the relevance of social imitation mechanisms behind dividend payout behavior and therefore adds to the current knowledge of the impact of behavioral processes on dividend policy.

scholarly journals Dividend Policy Decisions in India: Standalone Versus Business Group-Affiliated Firms

2018 ◽  
Vol 20 (1) ◽  
pp. 133-150 ◽  
Author(s):  
Nishant B. Labhane
Keyword(s):  
Dividend Policy ◽  
Stock Exchange ◽  
Business Groups ◽  
Business Group ◽  
Business Risk ◽  
Policy Decisions ◽  
Financial Leverage ◽  
Dividend Payout ◽  
Investment Opportunities ◽  
High Investment

This study examines the determinants of two important dividend policy decisions specifically the dividend payment decision and the dividend payout level decision of 781 sample Indian firms enlisted on National Stock Exchange (NSE) over the period, 1995–2015, comparing the business group-affiliated firms with the standalone firms. In term of characteristics, the business group-affiliated firms are larger, more profitable and more levered than the standalone firms. The empirical results suggest that the dividend policy decisions of business group-affiliated firms differ significantly from that of the standalone firms. In the case of standalone firms, the firms with high investment opportunities, high financial leverage and high business risk are less likely to pay dividends, and their dividend payout levels are lower. On the other hand, the firms affiliated with business groups are more likely to pay dividends, and their dividend payout levels are higher even when they have high investment opportunities, high financial leverage and high business risk. Overall, the findings suggest that although the business groups are able to create internal capital markets (ICMs) and shield their member firms from market imperfections, they may suffer from other information asymmetry problems.

Supply chain agility in humanitarian protracted operations

2016 ◽  
Vol 6 (2) ◽  
pp. 173-201 ◽  
Author(s):  
Cécile L'Hermitte ◽  
Peter Tatham ◽  
Ben Brooks ◽  
Marcus Bowles
Keyword(s):  
Supply Chain ◽  
Humanitarian Logistics ◽  
Future Research ◽  
Short Term ◽  
Content Type ◽  
Emergency Operations ◽  
Supply Chain Agility ◽  
Agile Practices ◽  
Basic Features

Purpose – The purpose of this paper is to extend the concept of agility in humanitarian logistics beyond emergency operations. Since the humanitarian logistics literature focuses primarily on emergencies and sees longer term and regular operations as being conducted in relatively stable and predictable environments, agile practices are usually not associated with humanitarian protracted operations. Therefore, this paper explores the logistics and supply chain environment in such operations in order to identify their basic features and determine if agility is an important requirement. Design/methodology/approach – Using a case study of the United Nations World Food Programme, the authors collected and analysed qualitative and quantitative data on the characteristics of protracted operations, the risks and uncertainties most frequently encountered, their impact, and the ways that field logisticians manage contingencies. Findings – The research demonstrates that unpredictability and disruptions exist in protracted operations. Therefore, short-term operational adjustments and agile practices are needed in order to support the continuity of humanitarian deliveries. Research limitations/implications – Future research should focus on a wider range of humanitarian organisations and move from a descriptive to a prescriptive approach in order to inform practice. Notwithstanding these limitations, the study highlights the need for academics to broaden the scope of their research beyond emergencies and to address the specific needs of humanitarian organisations involved in longer term operations. Originality/value – This paper is the first empirical research focusing exclusively on the logistics features of humanitarian protracted operations. It provides a more concrete and complete understanding of these operations.

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 All insects are equal, but some insects are more equal than others

2018 ◽  
Vol 120 (4) ◽  
pp. 852-863 ◽  
Author(s):  
Arnout R.H. Fischer ◽  
L.P.A. (Bea) Steenbekkers
Keyword(s):  
Design Methodology ◽  
Prior Experience ◽  
Future Research ◽  
Valuable Contribution ◽  
Short Term ◽  
Content Type ◽  
Quasi Experimental ◽  
Insects As Food ◽  
Practical Implications

Purpose Lack of acceptance of insects as food is considered a barrier against societal adoption of the potentially valuable contribution of insects to human foods. An underlying barrier may be that insects are lumped together as one group, while consumers typically try specific insects. The purpose of this paper is to investigate the ways in which Dutch consumers, with and without insect tasting experience, are more or less willing to eat different insects. Design/methodology/approach In a quasi-experimental study (n=140), the participants with and without prior experience in eating insects were asked to give their willingness to eat a range of insects, and their attitudes and disgust towards eating insects. Findings Insects promoted in the market were more preferred than the less marketed insects, and a subgroup of preferred insects for participants with experience in eating insects was formed. Research limitations/implications Although well-known insects were more preferred, general willingness to eat remained low for all participants. The results indicate that in future research on insects as food the specific insects used should be taken into account. Practical implications Continued promotion of specific, carefully targeted, insects may not lead to short-term uptake of insects as food, but may contribute to willingness to eat insects as human food in the long term. Originality/value The paper shows substantial differences between consumers who have and who have not previously tasted insects, with higher acceptance of people with experience in tasting insects for the specific insects that are frequently promoted beyond their generally more positive attitude towards eating insects.

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