Different Market Segmentations of Dividend Policies: A Dynamic Panel Data Analysis

Abstract

Objective - Despite much previous research on the issue, dividend policy remains an unsolved conundrum in corporate finance. By considering this, the goal of this research is to use the Generalized Method of Moments to examine dividend behaviour by identifying the key determinants of dividend policy in three different countries with different market microstructures: Singapore (developed market), Malaysia (developing market), and Saudi Arabia (emerging market). Methodology/Technique –. The study uses data from each country's top 100 listed firms from 2007 until 2016. The results suggest that different determinants influence firms’ dividend policies for the three countries. Findings - For Singapore as a developed market, profitability, and size are shown to be significantly and positively related to the dividend payout ratio, whereas leverage, business risk, and growth opportunities exert a significant negative effect. Meanwhile, for Malaysia (a developing market), only firm size is a significant and positive determinant. However, leverage and business risk are negatively and significantly associated with the dividend payout ratio. Conversely, for Saudi Arabia as an emerging market, firm size and leverage positively and negatively influence the dividend payout ratio. Novelty - Therefore, this study employed the generalized method of moments (GMM) to uncover novel discoveries. The findings should motivate analysts, policymakers, institutional investors, and investors to investigate the dividend policy conundrum, mainly for three different market segmentations. Type of Paper: Empirical JEL Classification: G32, M14. Keywords: Dividend behaviour, market microstructure, and Generalized Method of Moments. Reference to this paper should be referred to as follows: Shafai, N.A; Yusuf, N.H.M; Shah, N.S.B; Bulot, N. (2023). Different Market Segmentations of Dividend Policies: A Dynamic Panel Data Analysis, Acc. Fin. Review, 7(4), 01 – 11. https://doi.org/10.35609/afr.2023.7.4(1)