Corporate life cycle and dividend payout: A panel data analysis of companies in an emerging market

Abstract

Background: The dividend payout policy remains one of the key functional areas of corporate finance because it is through receipt of dividends that shareholders can share in the profits of their investments. Amongst the dividend payout theories that have been developed over the decades, the life-cycle hypothesis has received little attention in research.Aim: The aim of this study was to test the dividend life-cycle hypothesis in the South African contex.Motivation for the study: Justification for this study in the context of South Africa is that there is minimal research in this regard in emerging economies. South Africa presents a good platform for this research because it is amongst the highly regarded emerging markets and this has been confirmed by its representation in Brazil, Russia, India, China and South Africa (BRICS) countries. Hence, results in this regard would shed some light in the form of a relative representation of overall emerging markets trend.Research approach/design and method: A panel data of 119 Johannesburg Stock Exchange (JSE) listed sample companies were used to test the hypothesis during the period 2006–2015. A combination of basic and dynamic panel data estimators was used to analyse the data.Main findings: The study finds that the dividend life-cycle hypothesis is prevalent amongst South African companies. Specifically, it was observed that the considered companies pursuing growth projects paid less dividends. Furthermore, the growth companies have shown to be more aggressive in their pursuit for growth and hence are able to create more value for shareholders than value for companies.Managerial implications: Financial managers will be afforded with enhanced decision alternatives in respect of their fiduciary duties towards the shareholders in respect of maximising value.Conclusion: These results provide a mirror image of those of the developed markets and a good context for future research in the same area in an emerging economy setting.

The impact of the free cash flow and the firm’s life cycle on dividend policy: Evidence from Vietnam’s listed firms

“…𝑉 𝑖 : Represent unobservable factors that are unchanged following the time ɛ 𝑖𝑡 : Represent unobservable factors that are fluctuated following the time In addition, in order to remedy the common errors, such as multicollinearity, autocorrelation, and heteroskedasticity in panel data. The advanced estimator is a generalized method of moments (GMM) that will be employed following Munzhelele et al (2021).…”

“…According to the above test, the author concludes that the model faces some statistical errors such as heteroskedasticity and autocorrelation phenomenon. Therefore, the author uses the model GMM to remedy these phenomenon as Munzhelele et al (2021) and the result is shown in Table 8. The discussion of this study will rely on the regression results with the GMM model.…”

Determinants of Cash Distribution Options in South African Listed Firms: An Empirical Analysis of Earnings, Company Size, and Economic Value Added

“…According to Francis and Osborne (2012) and Lee and Hsieh (2013), several estimators can be adopted in the dynamic panel data model, which include the ordinary least squares (OLS), the differenced generalised methods of the moment (Diff GMM) of Arellano and Bond (1991), the system generalised methods of the moment (Sys GMM) of Blundell and Bond (1998), and the least-squares dummy variable correction (LSDVC) proposed by Bruno (2005). Numerous studies such as Andres et al (2009), Munzhelele et al (2021Munzhelele et al ( , 2022, and Obadire et al (2022a) successfully adopted this combination of dynamic panel estimators. The Diff-GMM is essential for estimating dynamic panel data models, particularly when endogeneity is a concern, as it transforms the data to eliminate fixed effects and offer robust parameter estimation using moment conditions.…”