Determinants of dividends policy: evidence from non-financial companies listed on Abu Dhabi Securities Exchange (ADX)
Abu Manneh, Marwan Butros
Cardiff Metropolitan University
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In this study, an attempt is made to establish the relationship between dividend policy and a number of attributes of non-financial companies listed on ADX. Dividend policy was represented by the dividend pay-out ratio calculated by dividing annual dividends paid over the annual income plus annual depreciation expense. Nine explanatory variables were used to represent corporate attributes: size, profitability, growth, ownership, leverage, free cash flows, risk, industry, and issuing or otherwise of governance report. To identify companies’ attributes that impact their dividend policies, the 2011 annual reports together with profiles for all non-financial companies listed on ADX were used. At the end of 2011, 31 non-financial companies were listed on ADX. The non-financial companies comprise telecommunications, energy, property and real estate, consumer staples, services and manufacturing. Single and multi-regression analyses were undertaken to identify attributes that influence dividend policy. The single regression showed that all variables estimated in the regression model separately were positively associated with dividend pay-out except growth and risk. Yet, only three variables including size, leverage and industry appeared to be significant determinants of dividend. The multiple regression pointed to four out of the nine company’s attributes to be the most important factors that influence dividend policy (leverage, free cash flows, ownership and industry), two variables appeared to be positively and significantly associated with dividend policy (leverage and free cash flows). This implies that availability of free cash flows and levels of leverage are the most important factors that shape dividend policies of non-financial companies listed on ADX. The result lends support to agency theory.
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