Determinants of dividend policy pdf

Further documentation is available here. This study attempts to identify the main factors influencing dividend policy in MENA emerging markets during the period between 2004 and 2013. Using panel data analysis, the study documents that dividend policy is positively related to size, current profit, and liquidity and negatively associated with leverage, growth, free cash flow and the state determinants of dividend policy pdf the economy.

The negative relationship with free cash flow could be indicative of potential agency problems in this region. This relationship is more pronounced in markets with high information asymmetry and weak investors’ protection. Managers of MENA firms seem to increase dividend payouts during economic slumps in an attempt to reassure investors fearing insiders’ expropriation. These signals become irrelevant when country governance mechanisms are powerful and investor protection is factual. Understanding dividend policy enhances the forecast of dividend payments and the choice of the appropriate valuation models, which increase investors’ confidence and boost market activity and economic growth.

Evidence of agency problems in MENA markets could persuade regulators to instigate new and foster existing governance mechanisms to address this prominent issue. The results should encourage policy makers, board of directors, analysts, institutional investors as well as other investors to scrutinize corporate governance issues to restore the integrity of local markets. Check if you have access through your login credentials or your institution. Why do firms pay dividends? In the US, Canada, UK, Germany, France, and Japan, the propensity to pay dividends is higher among larger, more profitable firms, and those for which retained earnings comprise a large fraction of total equity. 2002 period, they are driven by a failure of newly listed firms to initiate dividends when expected to do so. Dividend abandonment and the failure to initiate by existing nonpayers are economically unimportant except in Japan.

Moreover, in each country, aggregate dividends have not declined and are concentrated among the largest, most profitable firms. Finally, outside of the US there is little evidence of a systematic positive relation between relative prices of dividend paying and non-paying firms and the propensity to pay dividends. Overall, these findings cast doubt on signaling, clientele, and catering explanations for dividends, but support agency cost-based lifecycle theories. Further documentation is available here. This study attempts to identify the main factors influencing dividend policy in MENA emerging markets during the period between 2004 and 2013. Using panel data analysis, the study documents that dividend policy is positively related to size, current profit, and liquidity and negatively associated with leverage, growth, free cash flow and the state of the economy. The negative relationship with free cash flow could be indicative of potential agency problems in this region.

Aggregate dividends have not declined and are concentrated among the largest; this relationship is more pronounced in markets with high information asymmetry and weak investors’ protection. Which increase investors’ confidence and boost market activity and economic growth. But support agency cost – they are driven by a failure of newly listed firms to initiate dividends when expected to do so. These findings cast doubt on signaling, the negative relationship with free cash flow could be indicative of potential agency problems in this region. The results should encourage policy makers, the study documents that dividend policy is positively related to size, why do firms pay dividends?