Abstract
This study analyses the company-specific determinants of dividend pay-out decisions in South Africa. Why companies pay dividends and the factors influencing dividend pay-out decisions remains an unsolved problem in corporate finance. Due to this, the dividend policy and the dividend payments remain a relevant topic in corporate finance that needs to be examined and analyzed across developed and developing markets. For this reason, this study aims to identify and analyze company-specific factors influencing dividend pay-out decisions in South Africa. The study focuses on companies listed on the Johannesburg Stock Exchange from 2012 to 2019.
Descriptive analysis and Panel regression were used in the study to assess the relationship between the company-specific variables and the dividend pay-out ratio. Profitability, liquidity, company size, financial leverage and company age are the independent variables assessed in the study. The dividend pay-out ratio was used as the dependent variable. Panel regression models (pooled ordinary least squares model, the fixed-effect model, and the random effect model) were used to determine the most appropriate regression model for analyzing the relationship between the dividend pay-out ratio and the independent variables. The Hausman test determined the best model for the study. According to the Hausman test, the fixed effects model was the most appropriate panel regression model to assess the study topic. Results under this model indicated that profitability, company size, financial leverage and company age are the company-specific variables influencing dividend pay-out decisions of companies listed on the Johannesburg Stock Exchange. Liquidity was insignificant, meaning that this company-specific variable does not influence the dividend pay-out decisions of companies listed on the Johannesburg Stock Exchange.
The study’s results align with previous studies from developed and developing economies. The study will also contribute to corporate finance research and to the debate on dividend pay-out decisions, particularly company-specific factors that influence the dividend pay-out decisions.