Dividend policy and market value of banks in MENA emerging markets: 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.

DETERMINING HOUSING AFFORDABILITY FOR YOUNG PROFESSIONALS IN KLANG VALLEY, MALAYSIA: 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.

DETERMINING HOUSING AFFORDABILITY FOR YOUNG PROFESSIONALS IN KLANG VALLEY, MALAYSIA: 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.

Measuring Young Professionals’ Housing Affordability in Greater Kuala Lumpur

A plethora of approaches applied for measuring the housing affordability. Undoubtedly, the housing cost and household income are ubiquitous predictors to address the housing affordability. Besides, housing policies also receive an enormous attention in debating this issue. This study, therefore, presents the predictors of transportation cost along with other factors in addressing housing affordability for young professionals. Equally, important, individual life event is also highlighted as this matter is being given less attention. By adopting these dimensions, it is idyllic in associating the study gap. Young professionals are individuals aged between 25 and 35 years old and either working or living in Greater Kuala Lumpur with at least a bachelor’s degree qualification and registered through the professional firm. The purpose of the study is first, to measure young professionals’ affordability by underpinning the residual income approach and second, to explore the affordability through the housing trajectories concept. Thus, 290 survey data were analysed using the binary logistic regression. The study found that the predictors such as the presence of children, professional for engineer and quantity surveyor, employment status of permanent and other, household expenditure, household income, housing cost, transportation cost, housing location of Petaling Jaya and Putrajaya, are statistically significant to the housing affordability.