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Corporate dividends decisions: evidence from Saudi Arabia

Author

Listed:
  • Jasim Al‐Ajmi
  • Hameeda Abo Hussain

Abstract

Purpose - The paper aims to test the stability of dividend policy, test the effect of cash flow on the company's dividend policy, identify the factors that determine a firm's cash dividend payments, and examine the characteristics of dividend‐paying and non‐paying firms. Design/methodology/approach - The hypotheses are tested using unbalance panel data for a sample of 54 Saudi‐listed firms during 1990‐2006. Findings - Saudi firms pay out a lower proportion of their cash flows compared to the proportion of dividends of reported earnings. Firms have more flexible dividend policies since they are willing to cut or skip dividends when profit declines and pay no dividends when losses are reported. Lagged dividend payments, profitability, cash flows, and life cycle are determinants of dividend payments. Agency costs are not a critical driver of dividend policy of Saudi firms. Zakat is found to play a role in explaining firm's dividend decisions. Originality/value - This paper is the first to study the determinants of dividend policy in a country where companies are required to pay Islamic zakat.

Suggested Citation

  • Jasim Al‐Ajmi & Hameeda Abo Hussain, 2011. "Corporate dividends decisions: evidence from Saudi Arabia," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 12(1), pages 41-56, January.
    • Handle: RePEc:eme:jrfpps:15265941111100067
    DOI: 10.1108/15265941111100067
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    Citations

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    Cited by:

    1. Nor Anis Shafai, 2023. "Different Market Segmentations of Dividend Policies: A Dynamic Panel Data Analysis," GATR Journals afr222, Global Academy of Training and Research (GATR) Enterprise.
    2. Benjamin Amoah, 2024. "The story of dividend payment and corporate cash flow in Ghana," African Development Review, African Development Bank, vol. 36(1), pages 30-40, March.
    3. Nor Anis Shafai & Annuar Md. Nassir & Fakarudin Kamarudin & Norhuda Abdul Rahim & Nor Hayati Ahmad, 2019. "Dynamic Panel Model of Dividend Policies: Malaysian Perspective," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(3), September.

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