Factors affecting the dividend payout: Evidence from Saudi Arabia

Qaiser Aman; Sultan Altass; Faran Ahmad Qadri

doi:10.34069/AI/2022.59.11.14

Qaiser Aman King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia. https://orcid.org/0000-0003-4358-7940
Sultan Altass King Abdulaziz University Jeddah, Rabigh Rabigh Campus, Saudi Arabia. https://orcid.org/0000-0003-3733-7400
Faran Ahmad Qadri King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia. https://orcid.org/0000-0003-4892-0335

DOI: https://doi.org/10.34069/AI/2022.59.11.14

Keywords: Dividend payout, liquidity, financial leverage, profitability, and total assets.

Abstract

Businesses need financing and investors need higher returns. Both are indispensable for each other. Keeping in view the above fact, the current study examined the dividend payout factors affecting the Saudi cement industry. Secondary data are used to investigate the mentioned purpose over the period from 2006 to 2020. It was noticed that cement industry has become crucial for all other industries in general and particularly to the construction industry of Saudi Arabia. The study has employed the regression examination to explore the association regarding endogenous and exogenous variables. The present study has used the dividend payout ratio as an endogenous variable, while exogenous variables are liquidity (CR), profitability (ROA), FS (Firm Size), and financial leverage. The study reported that ROA has statistical significant and positive association with depended variable i.e. (dividend disbursement ratio). ROA is an important predictor of dividend payout, while FS, LEV, and CR have reported insignificant association with the dividend payout ratio. Cement industry of Saudi Arabia and investors would benefit from the current findings.

Downloads

Download data is not yet available.

Author Biographies

Qaiser Aman, King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia.

Ph. D., Associate Professor, Accounting department, College of Business, King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia.

Sultan Altass, King Abdulaziz University Jeddah, Rabigh Rabigh Campus, Saudi Arabia.

Dr. Sultan Altass, Vice Dean, College of Business, King Abdulaziz University Jeddah, Rabigh Rabigh Campus, Saudi Arabia.

Faran Ahmad Qadri, King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia.

Dr. Faran Ahmad Qadri, Associate Professor, Accounting department, College of Business, King Abdulaziz University Jeddah, Rabigh Campus, Saudi Arabia.

References

Abdelsalam, O., El-Masry, A., & Elsegini, S. (2008). Board composition, ownership structure, and dividend policies in an emerging market: Further evidence from CASE 50. Managerial Finance, 34, 953-964

Abor, J., & Bokpin, G.A. (2010). Investment opportunities, corporate finance, and dividend payout policy: evidence from emerging markets. Studies in Economics and Finance, 27(3), 180-194

Aivazian V., Booth L., & Cleary S. (2003). Do Emerging Market Firms Follow Different Dividend Policies From U.S. Firms? Journal of Financial Research, 26(3), pp. 371-387, https://doi.org/10.1111/1475-6803.00064

Ajanthan, A. (2013). Corporate governance and dividend policy: A study of listed hotels and restaurant companies in Sri Lanka. International Journal of Management, IT and Engineering, 3(12), 98-114.

Allen, D., E., & Rachim, V., S. (1996). Dividend policy and stock price volatility: Australian Evidence. Journal of Applied Economics, 6(2), 175-88.

Al-Shubiri, F., N. (2011). Determinants of change, dividend behavior policy: evidence from the amman stock exchange. Far East Journal of Psychology and Business, 4(2), 1-15. https://www.semanticscholar.org/paper/Determinants-of-Changes-Dividend-Behavior-Policy%3A-Arab/e3d22b0a4e2899196372ebd3793ee7e8a2e6c120

Arshad, Z., Akram, Y., Scholar, M., Amjad, M., & Usman, M., (2013). Ownership structure and dividend ratio. Interdisciplinary Journal of Contemporary Research in Business, 5(3), 378-401. https://journal-archieves34.webs.com/378-401.pdf

Bolbol, I. I. (2012). Board characteristics and dividend payout of Malaysian companies. (Unpublished Master Dissertation) University Utara Malaysia.

Chang, C., L. (2009). Dividend payout ratio, investment opportunities, and the pecking order theory: evidence from Taiwan. The Business Review, 13(1), 304-312

Fama, E., F., & Kenneth, R., F. (1993). Common risk factors in the returns on stocks and bonds, Journal of Financial Economics, 33, 3-56. https://www.stats.gov.sa/en/1004-0 (retrieved on 25-9-2021) https://yc.com.sa/en/annual_report2019 (retrieved on 21-9-2021)

General Authority for Statistics (2018). Industry and business, Construction activities. https://www.stats.gov.sa/en/1004-0 (retrieved on 25-9-2021)

Ho, H. (2003) Dividend policies in Australia and Japan. International Advances in Economic Research, 9(2), pp. 91-100, https://doi.org/10.1007/BF02295710

Jabbouri I. (2016). Determinants of corporate dividend policy in emerging markets: Evidence from MENA stock markets. Research in International Business and Finance, 37, 283-298, https://doi.org/10.1016/J.RIBAF.2016.01.018

Kaźmierska-Jóźwiak, B. (2015). Determinants of Dividend Policy: Evidence from Polish Listed Companies, Procedia Economics and Finance, 23(2015), 473.

Khan, M., N., Naeem, M., U., & Salman, M. (2016). Factors Affecting the Firm Dividend Policy: An Empirical Evidence from Textile Sector of Pakistan. International Journal of Advanced Scientific Research and Management, 1(5), 144-149.

Khan, Y., Ali, L., Batool, S., & Ali, A. (2017). Growth & Profitability of Private Commercial Banks: Major Indicator of Its Dividend Policy, 2(4), 92, https://doi.org/10.11648/J.AJOMIS.20170204.12

Mehta, A. (2012). An empirical analysis of determinants of dividend policy-evidence from the UAE companies. Global Review of Accounting and Finance, 3(1), 18-31

Miller, M., H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411-433.

Patra, T., Poshakwale S., & Ow-Yong, K. (2012). Determinants of corporate dividend policy in Greece. Applied Financial Economics, 22(13), 079-1087. https://doi.org/10.1080/09603107.2011.639734

Roychoudhury, J. (2020). Saudi Arabian Cement Companies: Upgrading Through Leveraging Saudi Arabian Overcapacity. Riyadh: KAPSARC. https://www.kapsarc.org/research/publications/saudi-arabian-cement-companies-upgrading-through-leveraging-overcapacity/

Wang, M., Ke, M., Liu, D.,-Y., & Huang, Y., S., (2011). Dividend Policy and the Life Cycle Hypothesis: Evidence from Taiwan. The International Journal of Business and Finance Research, 5(1), 33-52