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Article
Publication date: 4 December 2017

H. Kent Baker and Imad Jabbouri

The purpose of this paper is to examine how Moroccan institutional investors view dividend policy. It discusses the importance these investors attach to the dividend…

Abstract

Purpose

The purpose of this paper is to examine how Moroccan institutional investors view dividend policy. It discusses the importance these investors attach to the dividend policy of their investee firms, how much influence they exercise in shaping investee firms’ dividend policies, their reactions to changes in dividends, and their views on various explanations for paying dividends.

Design/methodology/approach

A mail survey provides a respondent and firm profile and responses to 28 questions involving various explanations for paying dividends and 30 questions on different dividend issues.

Findings

Institutional investors attach substantial importance to dividend policy and prefer high dividend payments. Although liquidity needs are a major driver, taxes play little role in shaping dividend preferences. Respondents agree with multiple explanations for paying dividends giving the strongest support to catering, bird-in-the-hand, life cycle, signaling, and agency theories.

Research limitations/implications

Despite a high response rate, the number of respondents limits partitioning the sample and testing for significant differences between different groups.

Practical implications

The lack of communication between Casablanca Stock Exchange (CSE) listed firms and institutional investors may depress stock prices and increase volatility. The results suggest agency problems and a weak governance environment at the CSE.

Originality/value

This study documents the importance that institutional investors place on dividend policy, their reactions to changes in their investees’ dividend policy, and the methods used to influence these firms. It extends previous research by reporting the level of support Moroccan institutional investors give to various explanations for paying dividends.

Details

Managerial Finance, vol. 43 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 14 August 2018

H. Kent Baker, Sujata Kapoor and Imad Jabbouri

This study aims to examine dividend policy from the perspective of institutional investors in India. It focuses on the level of importance these investors attach to the…

Abstract

Purpose

This study aims to examine dividend policy from the perspective of institutional investors in India. It focuses on the level of importance these investors attach to the dividend policy of their investee firms, the level of influence they exercise in shaping such firms’ dividend policies and their reactions to changes in dividends. This study also reports how institutional investors view various explanations for paying dividends.

Design/methodology/approach

A mail survey provides a profile of respondents and their firms, as well as responses to 29 closed-ended questions involving various explanations for paying dividends and 22 closed-ended questions on various dividend issues.

Findings

The evidence shows that Indian institutional investors attach substantial importance to dividend policy and prefer high dividend payments. Their reactions to dividend changes are asymmetric. Taxes are a major driver for why they seek dividends, whereas liquidity needs to play little role in shaping their preferences. The two most commonly used methods of active monitoring are selling shares and communicating concerns to investee companies.

Research limitations/implications

The number of responses limits the ability to test for statistically significant differences between the various competing hypotheses.

Practical implications

The findings support multiple explanations for paying cash dividends and provide new evidence supporting the positive relation between inflation and dividend payments.

Originality/value

This study provides the first survey evidence on the views of institutional investors on dividend policy in India.

Details

Qualitative Research in Financial Markets, vol. 10 no. 3
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 5 November 2020

Imad Jabbouri and Hamza Almustafa

This paper aims to document the impact of corporate cash holdings on firm performance in Middle East and North African (MENA) emerging markets. The authors also examine…

Abstract

Purpose

This paper aims to document the impact of corporate cash holdings on firm performance in Middle East and North African (MENA) emerging markets. The authors also examine how the quality of national governance shapes the interaction between corporate cash holdings and firm performance.

Design/methodology/approach

The authors employ data from non-financial firms listed on the stock markets of twelve MENA countries between 2004 and 2018. The empirical model avoids the shortcomings of the prior literature by applying a dynamic framework to the relationship between cash holdings and firm performance.

Findings

This research reports a significant positive relationship between corporate cash holdings and firm performance. The results appear to be more pronounced in countries with strong national governance and more developed institutional settings. The findings demonstrate that most benefits of corporate cash holdings can be achieved under strong institutional settings. The authors argue that the positive impact that national governance has on individual firms by reinforcing investors' protection and lowering agency problems increases the added value of cash holdings.

Practical implications

The findings should encourage local authorities and policymakers to reinforce the law and instigate new regulations to strengthen the quality of national governance and restore the integrity of local markets.

Originality/value

Prior studies have largely been silent on how national governance can shape the relationship between corporate cash holdings and firm performance. This paper draws attention to this issue within the context of MENA emerging markets. To the authors' best knowledge, this is the first study that explores the interaction between cash holdings, firm performance and national governance in MENA emerging markets.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

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Article
Publication date: 14 August 2017

H. Kent Baker, Imad Jabbouri and Chaimae Dyaz

The purpose of this paper is to examine corporate finance practices in the frontier market of Morocco and compare the practices used by Moroccan companies to those in…

Abstract

Purpose

The purpose of this paper is to examine corporate finance practices in the frontier market of Morocco and compare the practices used by Moroccan companies to those in other countries. It focuses primarily on capital budgeting and real options. The study also examines whether corporate finance practices used in Morocco are consistent with more theoretically superior techniques.

Design/methodology/approach

The study uses a mail questionnaire to gather data from chief financial officers and other senior executives of Casablanca Stock Exchange (CSE) listed companies.

Findings

Moroccan managers generally view the internal rate of return, accounting rate of return, and payback method as more important than the theoretically superior net present value. Few of the responding firms use real options when making capital budgeting decisions. They tend to use less sophisticated techniques to evaluate investment opportunities and calculate the cost of capital than their counterparts in developed countries. The most frequently used techniques by CSE-listed companies to estimate the cost of equity capital are the cost of debt plus an equity risk premium and the accounting return on equity. CSE-listed companies rely heavily on management’s subjective judgment to estimate cash flows.

Research limitations/implications

Despite a 40 percent response rate, the number of responses did not permit examining whether differences in firm size, industry, educational background, and other characteristics affect the results. Although non-response bias is a potential limitation, test results show no statistically significant differences between the responding and non-responding companies on any of the five characteristics analyzed. These findings lessen concern about potential non-response bias. Given that the findings relate to a frontier market, they are most likely generalizable to similar countries in the Middle East and North Africa region.

Practical implications

The findings may be useful to various parties including corporate managers, boards of directors, and financial analysts. Given that investment decisions affect shareholder wealth, understanding the practices used by corporate managers is crucial in deciding what projects to undertake. This research raises awareness for management to review their corporate finance practices, compare them with their peers, and examine whether these techniques are aligned with proper allocation of resources and value maximization.

Social implications

Overall, the findings imply that Moroccan firms have room to improve their corporate finance practices. Failing to do so could have serious implications ranging from the inefficient allocation of resources in the economy to the destruction of shareholder value.

Originality/value

To the authors’ knowledge, this is the most comprehensive study using survey methodology to investigate corporate finance practices in Morocco. It provides new insights on such topics as capital budgeting, capital structure, cost of capital estimation, and real option techniques.

Details

Managerial Finance, vol. 43 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 5 August 2019

Imad Jabbouri and Maryem Naili

The purpose of this paper is to explore how ownership concentration affects cost of debt (CoD) in one of the most important emerging markets in the Middle East and North…

Abstract

Purpose

The purpose of this paper is to explore how ownership concentration affects cost of debt (CoD) in one of the most important emerging markets in the Middle East and North Africa, Morocco.

Design/methodology/approach

The study employs panel data analysis using non-financial firms listed on Casablanca Stock Exchange (CSE) between 2004 and 2016. To unveil the hidden facets of the relationship between ownership concentration and CoD, and examine if this relationship changes with market conditions, we conduct a pre–post-crisis analysis.

Findings

The results demonstrate that controlling shareholders promote decent governance as long as they are able to generate appropriate returns. However, this behavior seems to change during the post-crisis period. In their attempts to increase their returns adversely affected by the financial crisis, controlling shareholders switch from guardians of decent governance and firm’s resources to a menace to creditors’ interests.

Practical implications

Our results expose the severity of agency problems in CSE. It is the duty of all market participants including regulators, board of directors, financial analysts, shareholders and creditors to scrutiny and reinforce governance mechanisms to alleviate expropriation by controlling shareholders. Improving country and firm-level governance mechanisms would enhance investors’ protection, attract international investors and boost the economic activity.

Originality/value

Prior research is inconclusive about the impact of ownership concentration on CoD. Hence, it is worthwhile to seek new evidence in a new market on the nature of this relationship.

Details

Review of Behavioral Finance, vol. 12 no. 3
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 1 May 2020

Imad Jabbouri and Omar Farooq

This paper aims to document the impact of inadequately educated workforce on the extent of financing obstacles experienced by firms.

Abstract

Purpose

This paper aims to document the impact of inadequately educated workforce on the extent of financing obstacles experienced by firms.

Design/methodology/approach

The authors use the data provided by the World Bank's Enterprise Surveys to test our arguments. The data were collected during the period between 2008 and 2018 in 141 developing countries. A pooled ordered logit regression analysis is performed to arrive at the results.

Findings

The study’s results show that firms with inadequately educated workforce are more likely to experience financing obstacles than other firms. The authors argue that poor performance and lack of technical expertise required to access finance are some of the reasons behind greater financing obstacles experienced by these firms. The study’s results are robust across different geographic regions. The authors also show that firms with inadequately educated workforce are more likely to seek informal credit for financing their short-term (working capital) and long-term (capital expenditures) capital requirements.

Practical implications

Understanding the factors that affect the financing constraints faced by small and medium enterprises (SMEs) should be valuable to managers of SMEs and policy-makers. By removing these constraints, managers can improve their access to financing, and policy-makers can facilitate higher economic growth and better economic conditions.

Originality/value

Prior studies have largely been silent on the impact of inadequately educated workforce on the access to finance. This paper draws attention to this issue within the context of SMEs in an international setting. SMEs are the drivers of economic growth in any country. However, their contributions to economic growth cannot materialize without fulfilling their capital needs.

Details

International Journal of Managerial Finance, vol. 17 no. 1
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 14 March 2016

H. Kent Baker and Imad Jabbouri

The purpose of this paper is to survey managers of firms listed on the Casablanca Stock Exchange (CSE) to learn their views about the factors influencing dividend policy…

Abstract

Purpose

The purpose of this paper is to survey managers of firms listed on the Casablanca Stock Exchange (CSE) to learn their views about the factors influencing dividend policy, dividend issues, and explanations for paying dividends. It compares the results to similar dividend surveys in the USA, Canada, Indonesia, and India.

Design/methodology/approach

The study uses a mail survey of CSE listed firms that paid one or more cash dividends to common stock holders between June 1, 2010 and September 30, 2014 as the primary means of collecting data.

Findings

The evidence shows that the most important determinants of a firm’s dividend policy are the level of current earnings, stability of earnings, and needs of current shareholders. A significant correlation exists between the overall rankings of the 25 factors influencing dividend policy between managers of Moroccan firms and those of USA, Canadian, Indonesian, and Indian firms. Managers of Moroccan firms perceive that dividend policy affects firm value. Managers view multiple theories including signaling, agency, catering, and life cycle explanations as credible and contribute in explaining why their firms pay dividends.

Research limitations/implications

Despite a high response rate of almost 55 percent, the number of responses limits the ability to divide the sample firms by size, industry, and other characteristics and to test for statistically significant differences between various groups.

Originality/value

This is the first survey-based research designed to document how Moroccan managers view dividends. Although evidence suggests that some factors are consistently more important than others, no universal set of factors is likely to be applicable to all firms.

Details

Managerial Finance, vol. 42 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

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