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Article
Publication date: 4 January 2011

Jasim Al‐Ajmi and Hameeda Abo Hussain

The paper aims to test the stability of dividend policy, test the effect of cash flow on the company's dividend policy, identify the factors that determine a firm's cash…

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Abstract

Purpose

The paper aims to test the stability of dividend policy, test the effect of cash flow on the company's dividend policy, identify the factors that determine a firm's cash dividend payments, and examine the characteristics of dividend‐paying and non‐paying firms.

Design/methodology/approach

The hypotheses are tested using unbalance panel data for a sample of 54 Saudi‐listed firms during 1990‐2006.

Findings

Saudi firms pay out a lower proportion of their cash flows compared to the proportion of dividends of reported earnings. Firms have more flexible dividend policies since they are willing to cut or skip dividends when profit declines and pay no dividends when losses are reported. Lagged dividend payments, profitability, cash flows, and life cycle are determinants of dividend payments. Agency costs are not a critical driver of dividend policy of Saudi firms. Zakat is found to play a role in explaining firm's dividend decisions.

Originality/value

This paper is the first to study the determinants of dividend policy in a country where companies are required to pay Islamic zakat.

Details

The Journal of Risk Finance, vol. 12 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 6 November 2009

Jasim Al‐Ajmi, Hameeda Abo Hussain and Nadhem Al‐Saleh

The purpose of this paper is to assess and explain the leverage of Saudi companies (53 companies) during the period 2003‐2007.

3729

Abstract

Purpose

The purpose of this paper is to assess and explain the leverage of Saudi companies (53 companies) during the period 2003‐2007.

Design/methodology/approach

This paper reviews two different classical capital structure theories, namely tradeoff theory and pecking order theory, to formulate testable propositions concerning the determinants of debt levels of Saudi companies. It develops a number of regression models (pooled OLS and panel techniques) to test the study's hypotheses.

Findings

The results suggest that a firm's capital structure is positively affected by profitability, size, growth opportunities, and institutional ownership. It is negatively impacted by tangibility, government ownership, family ownership, business risk, dividend payment, and liquidity.

Practical implications

Cost of capital is one of the pillars of corporate competitive advantage. Knowing which factors have the potential to influence capital structure can be essential to minimizing the cost of capital.

Originality/value

This is the first study of the determinants of capital structure in Saudi Arabia that considers dividend payment, ownership structure (as a proxy for agency problems), and risk. This work also contributes to the current debate regarding theories of competitive capital structure.

Details

The Journal of Risk Finance, vol. 10 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 25 September 2009

Jasim Al‐Ajmi, Hameeda Abo Hussain and Nadhem Al‐Saleh

The purpose of this paper is to report a study into: the motives that dispose customers in Bahrain to choose a specific bank; the level of familiarity of customers with…

7930

Abstract

Purpose

The purpose of this paper is to report a study into: the motives that dispose customers in Bahrain to choose a specific bank; the level of familiarity of customers with the most widely used services/products offered by Islamic banks; and the extent of use of those products.

Design/methodology/approach

This is the first study conducted in Bahrain to include three types of bank clients: those who bank with conventional banks, those who bank with Islamic banks, and who use both kinds of banks. The results are based on a response rate of 65.5 percent from 1,000 questionnaires distributed. Descriptive statistics and non‐parametric statistics (Mann‐Whitney and Kruskal‐Wallis tests) are reported, and factor analysis used to analyze the responses.

Findings

It is found that: Islamic religious belief and social responsibility are the two most important factors that determine bank selection. Cost benefit is the third most important factor considered in bank selection; clients of conventional and Islamic banks share a number of motives, but they differ significantly on a few motives in relation to bank selection; and clients of Islamic banks are more familiar with the products/services that conform to the sharia'a. Overall, for clients who bank exclusively with Islamic banks, and for those who bank in different kinds of banks, the most widely used product/service of Islamic banks is murabaha.

Practical implications

The most important practical implication is for banks, conventional and Islamic, when setting and implementing their marketing strategies, which should include an awareness campaign. The results also benefit banks operating in the countries of the Gulf Cooperation Council (GCC). This is because of the similarities of the countries in the GCC.

Originality/value

This paper is the first attempt to identify the motives and criteria for bank selection in Bahrain among clients of conventional banks, Islamic banks, and clients who bank with both types of banks. The study goes on to determine the extent of familiarity of clients of banks in Bahrain with the products/services that comply with Islamic sharia'a.

Details

International Journal of Social Economics, vol. 36 no. 11
Type: Research Article
ISSN: 0306-8293

Keywords

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