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Article
Publication date: 1 April 2003

H.P. Wolmarans

It is generally accepted that the payment of dividends is the most important and most widely used instrument for the distribution of value to shareholders. Shareholders…

Abstract

It is generally accepted that the payment of dividends is the most important and most widely used instrument for the distribution of value to shareholders. Shareholders also prefer to receive regular dividends rather than irregular cash payments. A well‐known model that attempts to explain dividend policy is that of Lintner (1956). This study investigates whether Lintner’s model can be used to explain South African dividend payments and compares this model with another, less sophisticated, model, namely the “percentage model”. Lintner’s model does not have a very good fit, probably as a result of the small sample used. Nearly half of the 200 largest companies that are listed on the Johannesburg Securities Exchange were excluded from the study as they were not listed for a sufficiently long period. Other companies were excluded on the grounds of having maintained their dividends on the same level for at least two consecutive years.

Details

Meditari Accountancy Research, vol. 11 no. 1
Type: Research Article
ISSN: 1022-2529

Keywords

Article
Publication date: 5 June 2017

Basil Al-Najjar and Erhan Kilincarslan

The purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly…

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Abstract

Purpose

The purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly, it examines the firm-level cash dividend behaviour of publicly listed firms in Turkey in the post-2003 period, since there were major economic and structural reforms as well as significant regulatory changes of dividend payout rules imposed by the supervisory bodies.

Design/methodology/approach

The paper focuses on a recent large panel data set of 264 Istanbul Stock Exchange (ISE)-listed firms over a ten-year period 2003-2012. First, it employs a modified specification of Lintner’s (1956) partial adjustment model for analysis regarding target payout ratio and dividend smoothing. Second, it performs a logit model for analysis in identifying the link between financial characteristics and the likelihood of paying dividends.

Findings

The results show that ISE firms now follow the same determinants as suggested by Lintner. They, indeed, have long-term payout ratios and adjust their cash dividends by a moderate level of smoothing, and therefore adopt stable dividend policies (although less stable policies compared to their counterparts in the developed US market) as a signalling mechanism over the period 2003-2012. Moreover, the results also report that ownership structure concentration affects the target payout ratio and dividend smoothing in the Turkish market. In addition, the results further show that more profitable, more mature and larger sized ISE firms are more likely to pay cash dividends, whereas ISE firms with higher investment opportunities and more debt are less likely to distribute cash dividends in the post-2003 period.

Originality/value

To the best of authors’ knowledge, this paper is the first major research that examines the implications of reforms and regulations on cash dividend payments and dividend smoothing over time in Turkey during its market integration process in the post-2003 period.

Details

International Journal of Managerial Finance, vol. 13 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 11 January 2013

Manoj Subhash Kamat and Manasvi M. Kamat

This study aims to find whether the Indian private corporate sector follow stable cash dividend policies, whether dividends smoothen earnings, estimate the implicit target…

Abstract

Purpose

This study aims to find whether the Indian private corporate sector follow stable cash dividend policies, whether dividends smoothen earnings, estimate the implicit target dividend ratio, and examine the determinants along with speed of adjustment of dividends towards a long run target ratio.

Design/methodology/approach

The study uses the instrumental variable (IV) approach for dynamic panel data for 1971‐2010 periods controlling for economic reforms. The GMM‐in‐levels model, GMM‐in‐first‐differences and GMM‐in‐systems are alternatively estimated to include other lag structures.

Findings

In the post‐reform period lower dividends are consistent with rapid growth in the economic environment and the tendency to smoothen dividends has considerably decreased over time. The estimated model suggests dividends substitute for less opportunity for internal growth and increased general likening to relatively retain their earnings and finance their growth, unlike the past.

Research limitations/implications

Limitation to capture substitution, ownership and self selection effects stems up from data as the Annual Studies RBI does not include such variables, does not capture qualitative data and disallows identification of the firm.

Practical implications

The paper documents long run trends and inter‐temporal dividend patterns controlling economic reforms for a relatively larger number of public limited firms nearing four decades for an emerging economy.

Originality/value

This is a first attempt to take a holistic view of dividend using rich set of unexplored dynamic panel data on Indian firms controlling for reforms using contemporary econometric models and analyzes issues relating determinants, smoothening and stability of the corporate dividend structure.

Details

Journal of Asia Business Studies, vol. 7 no. 1
Type: Research Article
ISSN: 1558-7894

Keywords

Article
Publication date: 13 March 2019

Basil Al-Najjar and Erhan Kilincarslan

The purpose of this paper is to shed light on the ongoing debate of dividend policy, which is considered one of the most controversial topics in corporate finance literature.

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Abstract

Purpose

The purpose of this paper is to shed light on the ongoing debate of dividend policy, which is considered one of the most controversial topics in corporate finance literature.

Design/methodology/approach

The paper provides a survey of literature; it, first, outlines the main theoretical arguments of dividend policy and then critically discusses the most important and influential previous empirical studies in the dividend literature.

Findings

The analysis of literature review detects that no general consensus has yet been reached after many decades of investigation, despite extensive debate and countless research. Consequently, the main motivation for paying dividends is still unsolved and thus remains as a puzzle. In addition, there is no doubt that carrying the dividend debate into the context of emerging markets attaches more pieces to this puzzle.

Originality/value

This paper offers an updated and more comprehensive survey of literature by examining the relationship between theory and practice from both developed and emerging markets.

Details

International Journal of Managerial Finance, vol. 15 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 23 January 2007

I.M. Pandey and Ramesh Bhat

The dividend payout behaviour of firms is a well‐studied subject in finance. In recent times, the influence of macro economic factors and understanding their implications…

3537

Abstract

Purpose

The dividend payout behaviour of firms is a well‐studied subject in finance. In recent times, the influence of macro economic factors and understanding their implications far corporate financial decisions has assumed significant importance. The objective of this paper is to study the dividend payout behaviour of firms in India under monetary policy restrictions. Monetary policy restrictions are expected to affect the availability and cost of external fund relative to internal funds. The hypothesis is that during monetary policy restrictions the dividend payout policy changes and payouts reduce.

Design/methodology/approach

The Lintner framework is extended to examine the impact of these restrictions on the dividend payout. Balanced panel data of 571 firms for years are used, from 1989 to 1997 together with, the GMM estimator, which is the most suitable methodology in a dynamic setting.

Findings

The results show that Indian firms have lower target ratios and higher adjustment factors. The finding suggests that the restricted monetary policies have a significant influence on the dividend payout behaviour of Indian firms; they cause about a 5‐6 per cent reduction in the payout ratios.

Research limitations/implications

The findings of this paper suggest that macro‐economic policies do have an impact on corporate financing decisions. The future research should examine the impact of various other macro‐economic policies and its components on the corporate financing decisions of firms.

Practical implications

The significance of the macro economic policy variables suggests that monetary policy restrictions do have an impact on the cost of raising funds, and the information asymmetry between lenders and borrowers increases, which forces companies to reduce their dividend payout.

Orginality/value

To one's knowledge this is the first study providing evidence of the restricted monetary policy constraining the dividend payout policies of firms in India.

Details

Managerial Finance, vol. 33 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 25 May 2012

Abdallah Atieh and Simon Hussain

Accruals data reflect managers’ judgements and estimates. The purpose of this paper is to examine whether they provide users of accounts with additional insight into a…

Abstract

Purpose

Accruals data reflect managers’ judgements and estimates. The purpose of this paper is to examine whether they provide users of accounts with additional insight into a firm's dividends beyond that conveyed by cash flows alone.

Design/methodology/approach

The authors employ regression analysis to examine the relative ability of earnings, cash flows and accruals to explain dividends.

Findings

It is found that both cash flows and accruals (earnings) possess significant explanatory power for dividends indicating that, on average, UK financial statements provide users with improved insight beyond that conveyed by cash flows alone.

Research limitations/implications

These results demonstrate the importance of accruals data for users of accounts. However, if accruals are manipulated for opportunistic purposes then their usefulness will likely be compromised and users of accounts will loose out. The study focuses on non‐financial, UK dividend‐paying firms only.

Practical implications

These results provide direct evidence that UK financial statement data has significant explanatory power for dividend‐paying activity, which may be viewed as good news. However, this paper reiterates the need for those who prepare and audit accounts to ensure that accruals truly reflect a firm's financial situation and are not being “managed” to artificially boost reported earnings. Short‐term accruals are an obvious focus for such activities.

Originality/value

The paper reports the first direct test of the link between disaggregated earnings components and UK dividends.

Details

Journal of Applied Accounting Research, vol. 13 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

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: 28 July 2021

Razaz Felimban, Sina Badreddine and Christos Floros

This paper examines the dividend smoothing (DS) behaviour in the Gulf Cooperation Council (GCC) countries in emerging markets where the response to news and the economic…

Abstract

Purpose

This paper examines the dividend smoothing (DS) behaviour in the Gulf Cooperation Council (GCC) countries in emerging markets where the response to news and the economic environment are different from those of developed countries.

Design/methodology/approach

The authors examine the effect of share price informativeness on DS in the GCC markets using unbalanced panel data for a sample of 628 GCC-listed firms during 1994–2016. For the regression analysis, the hypotheses are tested using panel regressions and generalised method of moments (GMM) estimation.

Findings

First, the Lintner model shows that the DS degree in GCC firms is comparable to that of a developed market. Second, and importantly, the results reveal that the DS in GCC firms is sensitive to private information of share prices. Finally, the findings indicate that information asymmetry (IA) and agency-based models affect the tendency to smooth dividends in the GCC markets.

Originality/value

This study is the first study to measure the degree of DS using data for all GCC countries. The authors also identify other determinants of DS behaviour and test the agency and IA explanations for DS in GCC-listed firms. The findings are highly recommended to financial managers and analysts dealing with the GCC markets. This study helps financial analysts to use the share price informativeness as an indicator for the presence of the IA. The study results are beneficial to researchers in understanding the relationship between DS and share price informativeness.

Details

Journal of Economic Studies, vol. 49 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 9 November 2015

Friday Kennedy Ozo, Thankom Gopinath Arun, Philip Kostov and Godfrey Chidozie Uzonwanne

The purpose of this paper is to provide an additional insight into the dividend puzzle by investigating the field practice of dividend policy in an emerging market such as…

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Abstract

Purpose

The purpose of this paper is to provide an additional insight into the dividend puzzle by investigating the field practice of dividend policy in an emerging market such as Nigeria. It also aims to contribute to the literature on industry-related dividend effect by examining whether managerial views on dividend policy vary between financial and non-financial firms.

Design/methodology/approach

The study employs semi-structured interviews with the financial managers of 21 Nigerian listed firms. The interviewees were divided into two broad groups of financial vs non-financial firms based on the industry classification of the firms.

Findings

The findings suggest that, despite differences in institutional environment, the dividend-setting process in Nigerian companies is similar in many extents to those in the USA and other developed markets. Nigerian companies exhibit dividend conservatism and typically focus on current earnings, stability of earnings and availability of cash when determining their current dividend levels. However, unlike in prior studies, the interviewees suggest that their companies do not have a target payout ratio; instead, they target the dividend per share when determining the disbursement level. Nevertheless, views regarding these issues vary significantly between financial and non-financial firms.

Originality/value

This paper adds to the extant literature that has examined the behavioural aspects of dividend policy using interviews, especially in the context of less-developed markets such as Nigeria. The study also updates and extends prior evidence on an industry-related effect on managerial perceptions of dividend policy.

Details

Managerial Finance, vol. 41 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 January 1992

D.E. Allen

This paper features a study of the dividend policies of the larger listed British companies. It focusses on the sample companies' usage of target payout ratios. A company…

Abstract

This paper features a study of the dividend policies of the larger listed British companies. It focusses on the sample companies' usage of target payout ratios. A company with a target payout is defined as one which has a policy of attempting to pay out a fixed proportion of available earnings as dividends. In particular, it examines the extent of the usage of explicit target payouts, the range of target payouts adopted and the frequency of changes in such targets. It also examines the factors which are perceived to have an influence on the company's choice of these targets. Finally, it extends and parallels previous work by Partington (1984) on the use of target payouts by Australian companies.

Details

Managerial Finance, vol. 18 no. 1
Type: Research Article
ISSN: 0307-4358

1 – 10 of 581