Abstract
Corporate Payout policy is one of the interesting topics in corporate finance literature that attracted the attention of many researchers. Despite the extensive research in this area, there is a contradiction between researchers on what are the main determinants of corporate payout policy. Researchers have mainly focused on developed markets and looked at a single dimension of the dividend policy. Therefore, the current study explores the determinants of dividend payout ratio by analyzing the effect of profitability, free cash flow, investment opportunity, liquidity, leverage, firm size and ownership structure on two dimensions of the dividend payout policy: the dividend decision and the payout ratio, taking a sample of all Egyptian listed firms in the period from 2007 till 2020. The results reveal the significance of profitability and investment opportunity on the dividend decision. For the payout ratio model, it is found that free cash flow, profitability and managerial ownership are significant determinants of payout ratio. Finally, by analyzing the dividend-paying firms, the results reveal that financial leverage affects the payout ratio of these firms.
Highlights
Successful corporation generates net income after deducting all kinds of expenses
The current study explores the determinants of dividend payout ratio by analyzing the effect of profitability, free cash flow, investment opportunity, liquidity, leverage, firm size and ownership structure on two dimensions of the dividend payout policy: the dividend decision and the payout ratio, taking a sample of all Egyptian listed firms in the period from 2007 till 2020
Looking at the whole sample, we can see that Egyptian listed firms in our sample have on average a positive free cash flow, which could be used as internal source of finance for firms having a good investment opportunity
Summary
Successful corporation generates net income after deducting all kinds of expenses. The company utilizes this net income for various purposes like acquiring new assets, repayment of outstanding debt, repurchase of outstanding common stock as well as distribution among shareholders. The sample period if this study is very rich as it includes a serious of political and economic events that affected the Egyptian stock market such as the Global Financial Crisis in 2008, the Egyptian revolutions in 2011 and 2013, the floatation of the Egyptian pound in 2016 and the widespread of Coronavirus in 2019 and 2020. This rich sample period enables the researchers to analyze the determinants of payout policy in a highly fertile sample period with different up and down trends.
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