Determinants of Dividend Policy: Evidence from Listed Firms in the African Stock Exchanges

The study demonstrates that much of the existing theoretical literature on dividend policy can be applied to the emerging capital markets of Africa. Using available financial data of listed firms in the 29 stock exchanges in Africa, the study finds similarities in the determinants of dividend policy in African firms with those in most developed economies. In particular, agency costs are found to be the most dominant determinant of dividend policy among African firms. The finding is non-synonymous with emerging capital markets which have a high concentration of private ownership and trading volumes. Agency cost theory may be important in both emerging and developed capital markets but the nature of the agency problem may be different in each case. Other factors such as level of market capitalisation, age and growth of firms, as well as profitability also play key roles in the dividend policy of listed African firms. Key words: Dividend policy, African countries, Listed firms, Corporate governance.JEL: G30, G35.