Dynamics of Corporate Dividend Policy under Hyperinflation and Dollarization: A Quantile Regression Approach

Strike Mbulawa (), Francis Nathan Okurut, Mogale Ntsosa and Narain Sinha
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Strike Mbulawa: Botho University, Department of Accounting and Finance
Francis Nathan Okurut: University of Botswana, Department of Economics
Mogale Ntsosa: University of Botswana, Department of Economics
Narain Sinha: University of Botswana, Department of Economics

International Journal of Business and Economic Sciences Applied Research (IJBESAR), 2020, vol. 13, issue 3, 70-82

Abstract: Purpose: Zimbabwe experienced hyperinflation (2000-2008) followed by dollarization from 2009 onwards which had implications on dividend policy. In this context, this study isolates the main determinants and examines their behaviour across the distribution of dividend policy. Design/methodology/approach: The study employs quantile regression analysis and a sample of 30 firms listed on the Zimbabwe Stock Exchange (ZSE), covering the period 2000 to 2016. The fixed effects (FE) analysis is applied as a base model. Finding(s): The most robust determinants are ownership structure, earnings per share (EPS) and taxation. In our context, results are more informative, than those based on FE analysis by showing the change in the impact of each explanatory variable across the distribution. EPS has a positive and significant impact on dividend policy throughout the distribution in both sample periods. Its effect increases in magnitude as firms move from low to high quantiles. The other variables are useful in explaining dividend policy at selected points of the distribution. Thus, there is clear heterogeneity in the determinants of dividend policy. Research limitations/implications: The study shows the importance of developing dividend policy by focusing on the position of the firm on the distribution. Dividend policy should be developed in view of the earnings potential of the firm, ownership concentration and perceived changes in fiscal policy. A well-designed policy should have a differentiated approach to influencing corporate dividends. Originality/value: This study enhances our understanding of dividend policy in unique markets. It confirms the applicability of dividend relevance theories. Furthermore, It shows that quantile analysis provides more reliable estimates than those obtained using standard panel data models.

Keywords: Dividend Policy; Hyperinflation; Dollarization; Quantile Regression; Zimbabwe (search for similar items in EconPapers)
JEL-codes: G32 G35 G39 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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