Determinants of corporate dividend payment policies: A case of the banking industry in South Africa

Abstract

Dividends are of strategic importance to organisations because they form the nexus of organisations’ capital structures and have an important bearing on firm value. Consequently, this study sought to investigate factors affecting dividend policy formulations and practices of South African banks by assessing the application of ex ante dividend theory literature on these firms. Our approach followed a mixed-methods design of analysis with a behavioural stand point of eliciting responses from banking experts through a survey. Findings indicate that factors relating to financial performance, investor needs and preferences and regulatory considerations are crucial for dividend decisions among banks. Overall, findings cast doubt on signalling, clientele and catering hypotheses, yet find favourable support for agency and lifecycle theories.

Towards Extending Dividend Puzzle Debate: What Motivates Distribution of Corporate Earnings in Tanzania?

“…The theoretical position manifested by Lintner (1956) reveals that dividends are paid out of profits; that is why it is impossible for an unprofitable company to pay dividends. Literature suggests several drivers of the corporate profitability, such as good corporate governance practices, (Ahmad 2015), high investor protection, (Boţoc and Pirtea 2014), close corporate monitoring by institutional shareholders, (Chang et al 2016;Jacob and Lukose 2018), regulatory consideration, (Kasozi and Ngwenya 2015), and minimum agency problem (Jacob and Michaely 2017). From these authors, one may deduce that companies with good corporate governance, sound regulatory support, high investor protection, strong corporate monitoring by institutional shareholders, and minimum agency problems are more profitable as compared to those companies with poor corporate governance practices, lower investor protection, weak corporate control by institutional shareholders, and having agency problems.…”