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

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.

Has the Propensity to Pay Dividends Declined? Evidence from the US Banking Sector

This article examines the propensity to pay dividends in the U.S banking sector during 1973–2014. Although the propensity to pay dividends has been declining over the 52 years of our sample period, banks are consistently more likely to pay dividends than non-financial firms. Using the coefficients from logit models estimated early in the sample period to forecast the percentage of dividend payers in each subsequent year, we conclude that there has been a decline in the likelihood of paying dividends in the banking sector. However, the decline started from a very high level as compared to that of the non-banking sectors. In addition, the variables taken from the non-financial firm literature do not explain the difference between the actual and expected percentage of dividend payers in the banking sector. We also conduct exploratory analyses with bank-specific variables. Although newly included variables are significantly related to the likelihood of paying dividends, they do not explain the declining propensity to pay dividends in the banking sector.

EXPRESS: Understanding Lateral and Vertical Biases in Consumer Attention: An In-Store Ambulatory Eye-Tracking Study

Given the conventional wisdom that “unseen is unsold,” retail practitioners are keenly interested in understanding consumers’ attention to products in the store. Using in-store ambulatory eye-tracking, we investigate the extent to which lateral and vertical biases drive consumers’ attention in a grocery store environment. Our dataset offers a complete picture of not only where the shopper is located, but also the shopper’s field of view and visual fixations during the trip. Using our novel dataset, we address two research questions: First, do shoppers have a higher propensity to pay attention to products on their left or right side as they traverse an aisle (i.e., is the right side the “right side”)? Second, do shoppers tend to pay more attention to products at their eye level (i.e., is eye-level “buy-level”)? We utilize the exogenous variations in the direction by which shoppers traverse an aisle (northward vs southward), obtainable from their shopping paths, to identify lateral bias. The exogenous variation of shoppers’ eye-level positions, due to their differences in height, is used to identify vertical bias. We find that shoppers pay more attention to products on their right side when traversing an aisle, and this bias holds for both right- and left-handed shoppers. Contrary to many practitioners’ belief, we find that eye-level is not “buy-level”; rather, the product level that has the highest propensity to capture shoppers’ attention is about 14.7 inches below eye-level (which is around chest level). Further, this vertical bias becomes more prominent during the latter part of a shopping trip.

Dividend Policy on IPOs Companies in Indonesia: A Life Cycle Theory Test

This study intends to assess the accuracy of life cycle theory prediction in explaining the dividendpayment policies when a company in Indonesia conducts the Initial Public Offerings. Technically, this studyaims to (1) examine the impacts of Retained Earnings to Total Equity (RE/TE), return on assets, firm age, firmsize, and growth opportunity toward propensity to pay dividends, and (2) examine the impacts of RE/TE, returnon assets, firm age, firm size, and growth opportunity toward dividend pay-out ratio. The population of thisstudy was all companies that conducted the Initial Public Offerings on the Indonesia Stock Exchange from2000 to 2017. The binary logistic regression model was used to analyze the data for reaching the first purposewhile the ordinary least square was applied to answer the second one. The results show that dividend paymentpolicies in the first year of companies conduct the Initial Public Offerings are in line with the life cycle theoryprediction. It is proved by the positive and significant impacts of RE/TE, return on assets, firm age, and firmsize toward propensity to pay dividends. Besides, it is also proved by the positive and significant impacts ofreturn on assets and firm size toward dividend pay-out ratio; as well as the negative and significant impact ofgrowth opportunity toward dividend pay-out ratio. The study does not acquire that growth opportunity gives asignificant impact on the propensity to pay dividends, and RE/TE and firm age significantly impact dividendpay-out ratio.

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

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.

The impact of catering incentives on the dividend policy: evidence from Turkish firms

PurposeThe purpose of this paper is to empirically analyse the propensity to pay dividends and investigate whether the catering theory is valid in an emerging market.Design/methodology/approachThe sample of this study comprises listed firms on the stock market of Turkey, Borsa Istanbul, with 2,438 observations during the period 1999–2015. In line with previous studies in the literature, appropriate control variables are used that may have an impact on Turkish firms' dividend policy. Control variables are examined in the likelihood of paying dividends by using Fama–Macbeth (1973) style cross-sectional logistic regressions. In addition, the linkage between the dividend premium and the propensity to pay is revealed to test the validity of the catering theory.FindingsThe findings of the study confirm the tenets of the catering theory for Turkey. When a positive dividend premium exists, that is when investors demand dividend, firms cater them and distribute dividend; on the contrary, when there is no demand, firms prefer not to pay. The effect of catering incentives on the dividend policy provides useful information for managers because the catering theory claims that investors' demand for dividends has an impact on the valuation of firms.Originality/valueIn the aftermath of the 2001 financial crisis, Turkey implemented far-reaching reforms and policy initiatives to improve the efficiency of capital markets and to overcome the obstacles sourcing from their culture and civil law origin. With the adoption of these major economic and structural reforms, as a civil law origin country, Turkey has managed to ameliorate the protection of investors as in common law countries. Ferris et al. (2009) state that the catering theory is applicable to firms in common law countries but not in civil law countries. In addition, prior research is not so extensive regarding the impact of catering incentives on the dividend policy of firms in emerging markets. The results of the analyses suggest that the catering theory is valid for Turkey as a civil law origin emerging country, and to the best of authors' knowledge, this study is the first to test the catering theory in the Turkish capital markets.

Does entrenchment of managers affect entrepreneurial dividend decision and investor sentiment?

Purpose The purpose of this paper is to observe whether the entrenchment of managers can affect firms’ dividend disbursement decisions and investor sentiment in the Tunisia context. Design/methodology/approach The sample includes all non-financial listed stocks in the Tunisia stock exchange during the years 2004–2017. Moreover, the entrenchment of managers is measured by five proxy explained the managers rooting from all listed firms. The propensity to pay dividends is measured by the dividend yield. Findings The findings yield qualitatively consistent with the previous research. After controlling for the effect of a manager’s behavior and different entrenchment phase, the result shows that entrepreneurial the firm’s decision to pay dividends could be influenced by the managers’ entrenchment. Research limitations/implications The result is limited at the level of the non-financial companies listed in the BVMT, but in future studies, the investigation with other countries can be compared. Practical implications Moreover, investors in Tunisia show their preference for a dividend to self-control and satisfaction and increase their profit, especially in an abnormal economic situation explained by the Tunisian political crisis. Originality/value The originality of this paper is to investigate both the important role of the entrenchment and cycle life of the manager on the decision to distribute dividends and the investor sentiment. Moreover, the author’s problem may be a reference for future investigation talking about the managers’ psychology like opportunism.

The Role of Institutional Ownership and Industry Characteristics on the Propensity to Pay Dividend: An Insight from Company Open Innovation

The purpose of this study is to test the free cash flow agency theory hypothesis; namely, (a) whether differences in industrial sector affect a company’s propensity to pay dividends, and (b) whether institutional ownership is able to substitute for the propensity to pay dividends as a bonding mechanism. The analysis uses logistic regression to explore the existence of institutional ownership as a substitute for paying cash dividends in companies belonging to different industrial sectors. The results show that companies in the manufacturing sector have a greater propensity to pay dividends compared to those in non-manufacturing sectors. The results also indicate that low institutional ownership, as an external monitoring mechanism, can substitute for increasing the propensity to pay dividends. Overall, the results are consistent with implications in dividend policy. The results support the notion that the propensity to pay dividends accommodates different behavioral factors, considering sectoral differences. In addition, the results illustrate the relevance of alternative theories in explaining dividend policy from the perspective of agency theory. The results show that sectoral comparisons, in addition to institutional ownership factors, play important roles in the propensity of Indonesian companies to pay dividends. This study shows that each industry sector has different income characteristics, which affect the differences in propensity to pay dividends.

DOES SIZE OF THE FIRM MATTER IN THE RELATIONSHIP BETWEEN FOREIGN OWNERSHIP AND DIVIDEND POLICY?

Prior studies have revealed that foreign shareholders have a greater influence on dividend policy. However, it is unclear how foreign owners in large firms affect the propensity to pay dividends. This paper is aimed at exploring the relationship between the propensity to pay dividends and foreign ownership. It also examined the moderating role of firm size on the relationship between the decision to pay cash dividend and foreign ownership. The study uses pooled logistic regression on a data set of non-financial listed firms on the Nigerian Stock Market from 2011 to 2015. The results showed that foreign ownership has a great tendency to influence the propensity of a firm to pay a cash dividend. The effect is more pronounced in larger firms, thus, indicating that in larger firms, foreign owners mitigate agency problems using dividends. Based on the findings, firms should be encouraged to pay a dividend to attract foreign investors and in return will help the firms to acquire the expertise of foreign owners.