Determinants of UK companies’ dividend policy
This study examines the major factors influencing UK companies listed on the Financial Times Stock Exchange (FTSE) 100 stock market's dividend policy (as determined by the dividend payout ratio) over 32 years, from 1990 to 2022. The dividend premium and free cash flow components make up the cat...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2024-03-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19776/IMFI_2024_01_Momany.pdf |
| _version_ | 1826818038439084032 |
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| author | Munther Momany Khaled Bataineh Omar Al-Bataineh |
| author_facet | Munther Momany Khaled Bataineh Omar Al-Bataineh |
| author_sort | Munther Momany |
| collection | DOAJ |
| description | This study examines the major factors influencing UK companies listed on the Financial Times Stock Exchange (FTSE) 100 stock market's dividend policy (as determined by the dividend payout ratio) over 32 years, from 1990 to 2022. The dividend premium and free cash flow components make up the catering dividend. The outcomes of a wide range of panel data analysis regressions, such as Generalized Method of Moments (GMM) and Two-Stage Least Squares (2SLS) regressions, clearly show that the catering dividend significantly impacts UK firms' dividend policy. On the other hand, the dividend policy benefits from the dividend premium, which increases it by 12% to 17% on average. Free cash flow, on the other hand, has a negligible negative impact on the dividend policy by just 5%. It is crucial to mention that this outcome varies depending on the models and regression techniques used. Furthermore, this study emphasizes how important it is for a firm's size and profitability to play a key role in determining how it will implement its dividend policy. Financial leverage also becomes important since a company's dividend payment ratio decreases when it relies more heavily on debt in its capital structure. By using GMM and 2SLS regressions, this study carefully tackles the endogeneity issue, and the results hold up even when the endogeneity effect is reduced. Ultimately, this study emphasizes how important dividend catering components are in guiding UK companies' dividend policies, arguing that CEOs and legislators should pay more attention to this. |
| first_indexed | 2024-04-24T22:36:43Z |
| format | Article |
| id | doaj.art-4ce8e3582e2144818516f17020d8cc35 |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2025-02-16T05:44:37Z |
| publishDate | 2024-03-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-4ce8e3582e2144818516f17020d8cc352025-02-03T10:35:00ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582024-03-0121138639610.21511/imfi.21(1).2024.2919776Determinants of UK companies’ dividend policyMunther Momany0https://orcid.org/0000-0002-8088-4437Khaled Bataineh1https://orcid.org/0000-0002-8527-2392Omar Al-Bataineh2https://orcid.org/0000-0003-0412-9189Professor of Accounting, Dean of the College of Economics and Management/Alqasimia University, College of Economics and Management, Department of Economics, Alqasimia University, United Arab EmiratesAssistant Professor of Finance, Faculty of Business, Finance and Banking Sciences Department, Yarmouk University, JordanAssistant Professor of Finance, Finance and Banking Sciences Department, The Hashemite University, JordanThis study examines the major factors influencing UK companies listed on the Financial Times Stock Exchange (FTSE) 100 stock market's dividend policy (as determined by the dividend payout ratio) over 32 years, from 1990 to 2022. The dividend premium and free cash flow components make up the catering dividend. The outcomes of a wide range of panel data analysis regressions, such as Generalized Method of Moments (GMM) and Two-Stage Least Squares (2SLS) regressions, clearly show that the catering dividend significantly impacts UK firms' dividend policy. On the other hand, the dividend policy benefits from the dividend premium, which increases it by 12% to 17% on average. Free cash flow, on the other hand, has a negligible negative impact on the dividend policy by just 5%. It is crucial to mention that this outcome varies depending on the models and regression techniques used. Furthermore, this study emphasizes how important it is for a firm's size and profitability to play a key role in determining how it will implement its dividend policy. Financial leverage also becomes important since a company's dividend payment ratio decreases when it relies more heavily on debt in its capital structure. By using GMM and 2SLS regressions, this study carefully tackles the endogeneity issue, and the results hold up even when the endogeneity effect is reduced. Ultimately, this study emphasizes how important dividend catering components are in guiding UK companies' dividend policies, arguing that CEOs and legislators should pay more attention to this.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19776/IMFI_2024_01_Momany.pdf2SLScateringdividendendogeneityFTSEGMM |
| spellingShingle | Munther Momany Khaled Bataineh Omar Al-Bataineh Determinants of UK companies’ dividend policy Investment Management & Financial Innovations 2SLS catering dividend endogeneity FTSE GMM |
| title | Determinants of UK companies’ dividend policy |
| title_full | Determinants of UK companies’ dividend policy |
| title_fullStr | Determinants of UK companies’ dividend policy |
| title_full_unstemmed | Determinants of UK companies’ dividend policy |
| title_short | Determinants of UK companies’ dividend policy |
| title_sort | determinants of uk companies dividend policy |
| topic | 2SLS catering dividend endogeneity FTSE GMM |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19776/IMFI_2024_01_Momany.pdf |
| work_keys_str_mv | AT munthermomany determinantsofukcompaniesdividendpolicy AT khaledbataineh determinantsofukcompaniesdividendpolicy AT omaralbataineh determinantsofukcompaniesdividendpolicy |