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What influence dividend decisions of firms in Sub‐Saharan African?

What influence dividend decisions of firms in Sub‐Saharan African? Purpose – The purpose of this paper is to examine the determinants of the dividend decisions of firms in Sub‐Saharan Africa (SSA). Design/methodology/approach – The paper applies a two‐step estimation procedure using firm‐level panel data for firms in selected SSA countries during the period from 1997 to 2007. In the first step the paper employs a probit model to estimate the parameters of the determinants of the decision to pay or not to pay dividends. In the second step the paper estimates the parameters of the dividend payout and dividend per share models by applying the generalised least squares techniques. Findings – The results provide consistent evidence that dividend decision and its payments are influenced by firm profitability level, investment opportunity sets, taxation, leverage, institutional shareholding and risk. The results affirm the signalling, agency cost and free‐cash flow theories of dividend policy. Originality/value – The main value of this paper is identification of factors that influence dividend decisions of firms in SSA. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

What influence dividend decisions of firms in Sub‐Saharan African?

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
2042-1168
DOI
10.1108/JAEE-12-2011-0053
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the determinants of the dividend decisions of firms in Sub‐Saharan Africa (SSA). Design/methodology/approach – The paper applies a two‐step estimation procedure using firm‐level panel data for firms in selected SSA countries during the period from 1997 to 2007. In the first step the paper employs a probit model to estimate the parameters of the determinants of the decision to pay or not to pay dividends. In the second step the paper estimates the parameters of the dividend payout and dividend per share models by applying the generalised least squares techniques. Findings – The results provide consistent evidence that dividend decision and its payments are influenced by firm profitability level, investment opportunity sets, taxation, leverage, institutional shareholding and risk. The results affirm the signalling, agency cost and free‐cash flow theories of dividend policy. Originality/value – The main value of this paper is identification of factors that influence dividend decisions of firms in SSA.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Feb 25, 2014

Keywords: Developing countries; Dividend decision; Dividend payout ratio; Stock markets

References