The Factors Determining Dividend Policy of Financial Firms Listed on the Borsa Istanbul

This paper investigates the determinants of dividend policy in Tanzania. The study employed a panel data of non-financial firms listed on the Dar es Salaam Stock Exchange (DSE) for the period 2008–2017. The paper reports profitability, liquidity, firm size, leverage, firm growth, previous dividend, and GDP as the major determinants of corporate dividend policy. According to the results, leverage, firm growth, and GDP are negatively related to dividend payout ratio while firm size, profitability, liquidity, and lagged dividend are positively related to dividend policy. More specifically, large-sized firms, highly profitable firms, and firms who paid dividend in previous years are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will, therefore, opt saving money to finance their expansion and honor their debt obligations. Following these results, corporate managers are advised to consider preferences of investors towards developing corporate dividend policy; to strive paying dividend whenever economically viable (as it signals the firm’s reputation), and to limit excessive borrowing to protect firms from getting into financial meltdown (although borrowing is considered a control tool for agency-related problems).

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

Journal of Capital Markets Studies ◽

10.1108/jcms-04-2020-0011 ◽

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.

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The Paradox of Managerial Dividend Policy in Corporate Malaysia

Review of Economics and Development Studies ◽

10.26710/reads.v5i1.394 ◽

2019 ◽

Vol 5 (1) ◽

pp. 197-204

Author(s):

Muhammad Farhan Basheer ◽

Muhammad Haroon Hafeez ◽

Raza Ali ◽

Shahzad Akhtar

Keyword(s):

Firm Value ◽

Dividend Policy ◽

Mail Survey ◽

Cover Letter ◽

Listed Firms ◽

Financial Firms ◽

Single Pattern ◽

Managerial Perception ◽

Primary Means ◽

Potential Factors

The prime objective of this paper is to survey the managers of Bursa Malaysia listed non-financial firms and to divulge their views regarding the significance of various potential factors that may affect dividend decisions. In addition to that, we are also interested in highlighting that how managerial perception about the importance of these factors varies from country to country. Our next objective is to know the level of importance, Malaysian managers give to dividend processes and pattern, firm value. Dividend policy (DP) and residual dividend policy (RDP). Finally, we are interested in measuring the level of support that Malaysian managers provide for different justifications for the payment of dividends. Survey instrument including a cover letter was mailed to chief finance officers (CFO) and finance managers of 493 Bursa Malaysia listed firms in October 2017. In the cover letter, a request was made to all respondents that in case of their non-involvement in dividend decision the letter must be forwarded to concerned authority involved in dividend decisions. The response rate of the current study is 40.09 percent (202 out of 493 firms). The study has used a mail survey of Bursa Malaysia listed non-financial firms that have paid at least one cash dividend during the period of 2013-2016 as a primary means of collecting data. No single pattern in rankings of factors among different countries has emerged. However, like their American, Canadian and Indonesian counterparts, According to Malaysian managers, dividend decisions have a significant effect on firm value. Although, a great deal of support has already been established with all dividend theories, however clientele and agency theory has proven to be the strongest one. In author’s knowledge, this is the first study designed to explore the views of Malaysian managers on DP in Malaysia.

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Pengaruh Corporate Governance Dan Manajemen Laba Terhadap Kebijakan Dividen

AKRUAL Jurnal Akuntansi ◽

10.26740/jaj.v5n2.p151-167 ◽

2014 ◽

Vol 5 (2) ◽

pp. 151

Author(s):

Agustina Ratna Dwiati ◽

Muhammad Bisyri Effendi

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Multiple Regression ◽

Dividend Policy ◽

Stock Exchange ◽

Investment Opportunity ◽

Financial Firms ◽

Investment Opportunity Set ◽

The Impact

AbstractThe aim of this study is to test the impact of corporate governance and investment opportunity set toward dividend policy with earnings management as intervening variable. The sample of this study is non-financial firms listed in Indonesia Stock Exchange and also a member of Corporate Governance Perception Index on 2012 and 2013. The method that used in this study is multiple regression. The results showed that company with strong corporate governance really cared about shareholders interests by giving high dividend for them. Meanwhile, earnings management has no impact toward dividend policy.

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The Determinants of Corporate Dividend Policy in Poland

Ekonomika ◽

10.15388/ekon.2019.1.6 ◽

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.

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BOARD COMPOSITION, OWNERSHIP STRUCTURE AND DIVIDEND POLICY IN PAKISTAN

Jinnah Business Review ◽

10.53369/sfjz5416 ◽

2015 ◽

Vol 03 (02) ◽

pp. 30-39

Author(s):

Usmna Azher ◽

◽

Syed Kahsif Saeed

Keyword(s):

Ownership Structure ◽

Dividend Policy ◽

Positive Impact ◽

Stock Exchange ◽

Board Composition ◽

Board Independence ◽

Dividend Payout ◽

Financial Firms ◽

The Impact ◽

Decision Board

The aim of this study was to examine the impact of board composition and ownership structure on dividend policy of the firms listed in Karachi stock exchange. For this purpose, the data of 150 non-financial firms from 2008 to 2012 was employed. This study used descriptive as well as fixed effect and logit models for the estimation purpose. Results showed that CEO Duality and ownership concentration have an insignificant impact on dividend policy. Profitability measures and institutional ownership showed a positive significant impact on both dividend payout ratio and dividend decision. Board independence showed a significant positive impact on dividend payout ratio; however, it remained insignificant in case of dividend decisions.

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MODERATING EFFECT OF FINANCIAL PERFORMANCE ON THE RELATIONSHIP BETWEEN BOARD CHARACTERISTICS AND DIVIDEND POLICY OF LISTED NON-FINANCIAL FIRMS IN NIGERIA

International Journal of Advanced Research in Statistics, Management and Finance ◽

10.48028/iiprds/ijarsmf.v8.i1.03 ◽

2021 ◽

Vol 8 (1) ◽

pp. 34-48

Author(s):

Alawiyya Ilu ◽

◽

Yunusa Ibrahim ◽

Binta Nuhu ◽

◽

...

Keyword(s):

Financial Performance ◽

Dividend Policy ◽

Moderating Effect ◽

Policy Implications ◽

Board Composition ◽

Board Size ◽

Board Diversity ◽

Board Characteristics ◽

Financial Firms ◽

The Relationship

The study analyses the moderating effect of financial performance on the relationship between board characteristics and dividend policy of listed non-financial firms in Nigeria. Board characteristics is proxied by board composition, board size, and board diversity, while dividend policy is proxied by dividend pay-out ratio. The positivist research paradigm and correlational research design were used. Relevant data for the study were collected from 39 sampled non-financial firms actively trading on the floor of the Nigerian stock exchange (NSE) from 2008 to 2017; the data collected were analysed using the panel corrected standard error (PCSE) regression analysis. The findings reveal that board composition and board diversity have positive but insignificant effect on dividend pay-out ratio of non-financial firms before moderation, While, board size has positive and significant effect on dividend policy of listed non-financial firms before moderation. The study also found that financial performance moderate the relationship between board characteristics and dividend pay-out ratio of listed non-financial firms. Based on the findings, the study concludes that board composition and board size are related with high dividend payment. Among the important policy implications is that the variable of board size used suggest that there is the need by SEC to monitor the available cash at the discretion of managers since financial performance can moderate the relationship between board size and dividend pay-out ratio in order to mitigate agency conflict between management and shareholders of listed non-financial firms which is in-line with the practical problem of the study. It is therefore recommended amongst others that the government through the regulators should provide an enabling environment for non-financial firms to make a profit and pay more dividends to their shareholders since the interaction effect of financial performance makes the variables of the study to be more active in influencing the dividend pay-out ratio of non-financial firms in Nigeria.

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The Effect of Working Capital Management on Dividend Policy: An Empirical Analysis of Listed Firms in Ghana

International Journal of Industrial Management ◽

10.15282/ijim.6.1.2020.5328 ◽

2020 ◽

Vol 6 (1) ◽

Author(s):

I.N Yakubu

Keyword(s):

Firm Growth ◽

Dividend Policy ◽

Management Practices ◽

Ordinary Least Squares ◽

Capital Management ◽

Working Capital ◽

Working Capital Management ◽

Financial Firms ◽

Cash Conversion Cycle ◽

The Impact

Relying on more recent data spanning 2007-2016, this paper investigates the impact of working capital management (WCM) on dividend policy of listed non-financial firms in Ghana. Specifically, the study assesses the effect of cash conversion cycle (CCC), days inventory outstanding (DIO), profitability, and firm growth on dividend policy. Employing the ordinary least squares (OLS) analytical technique, the findings reported that working capital management (in terms of cash conversion cycle and days inventory outstanding) and dividend policy are positively related, with DIO having a significant effect on dividend policy. The results also established a positive association between the control variables (profitability and firm growth) and dividend policy albeit insignificantly. Based on the findings, the study concludes that working capital management in terms of days inventory outstanding (DIO) is a critical factor influencing firms’ dividend policy decisions. The study extends the inconclusive empirical evidence on the determinants of dividend policy and fills the lacuna in existing literature by focusing on how working capital management practices influence dividend policy of firms in Ghana. The findings are also useful to the board of directors of non-financial firms in deciding an appropriate dividend policy, and to the shareholders in making investment decisions.

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Dividend policy and the downside risk in stock prices: evidence from the MENA region

The Journal of Risk Finance ◽

10.1108/jrf-10-2020-0226 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Omar Farooq ◽

Harit Satt ◽

Fatima Zahra Bendriouch ◽

Diae Lamiri

Keyword(s):

Stock Prices ◽

Dividend Policy ◽

Agency Problems ◽

Downside Risk ◽

Mena Region ◽

Content Type ◽

Financial Firms ◽

Dividend Policies ◽

The Impact ◽

The Relationship

PurposeThe aim of this paper is to document the impact of dividend policies on the downside risk in stock prices.Design/methodology/approachThe authors use the data for non-financial firms from the MENA region to test our arguments by estimating the pooled OLS regressions. The data cover the period between 2010 and 2018.FindingsThis paper shows that firms with higher dividend payouts have significantly lower downside risk in their stock prices than the other firms. The findings of this paper are robust across various proxies of dividend policy and across various sub-samples. This paper contends that lower downside risk associated with the stock prices of firms paying high dividends is due to the fact that these firms have lower agency problems. Lower agency problems reduce the downside risk in stock prices.Originality/valueTo the best of the authors’ knowledge, most of the prior research (covering the MENA region) overlooks the impact of dividend policy on the downside risk in stock prices. This paper fills this gap by documenting the relationship between the two by using the data for firms from the MENA region.

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