Dividend policy of firms listed on Casablanca Stock Exchange: a panel data analysis

This study investigates specifically the effects of institutional settings and risks on dividend payout policy for banks operate in an emerging market of Nigeria. The present study measures the risk by using financial, business, credit, and default risk at the bank-level and financial, economic, and political risk at the country level. To achieve the objective of this study, panel data random-effects Tobit estimation methodology is employed from the period 2007–2016. Findings reveal that the weak institutional settings lead Nigerian banks to pay out fewer dividends and set their payouts corresponding to the substitution agency model of dividends. Also, results show that Nigerian banks typically pay out more dividends in cases of growth opportunity as a substitute mechanism for mitigating agency problems and for establishing a good reputation. However, by strengthening the levels of investor protection, Nigerian bank managers prefer a low payout policy and are less probable to use dividend policies as a substitute mechanism. Moreover, except for the positive effect of default risk, findings show that the risks at the bank-level, in particular, business risk, and at the country level, particularly financial and economic risks, have a significant negative effect on dividend payouts. Results are robust to alternative estimation procedures and also document that global risk has a statistically significant negative impact on Nigerian banks’ dividend payouts policy.

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