The propensity to pay dividends: empirical evidence from the MENA region

Abstract

This paper investigates the relation between stock market sentiment and firms' propensity to pay dividends in the MENA region for the period 2000-2015. Using conventional determinants of cash distributions as control variables, our results show that the tendency to pay dividends is negatively related to the aggregate investors' sentiment but positively related to the dividend premium. Unlike prior literature, we report no association between firms' dividend policy and issues of stock market liquidity. Overall, we suggest that corporate payout policies in the case of the MENA region can best be explained by the dividend catering hypothesis.

Retained Earnings and Dividends in Real Estate Sector in Egypt

“…Shifting focus to the Middle East and North Africa (MENA) regions, Andrikopoulos et al (2020) highlight firms in these regions exhibiting an increased tendency to pay dividends during periods of negative market sentiment, particularly after the Arab Spring revolution from 2010 to 2015. Their results also support the notion of catering incentives, thus indicating that MENA firms tend to align with the desire of investors for cash distributions.…”

“…Most research on dividend policies has predominantly focused on developed economies, such as the United States of America (USA) and the United Kingdom (UK). In contrast, only a few studies, including those by El-Ansary and Gomaa (2012), Desoky and Mousa (2019), Andrikopoulos et al (2020), Budagaga (2020), and Mrzygłód et al (2021), have explored the dividend-RE policy of firms in emerging markets like Egypt. However, the Egyptian market, being an emerging market, is still deemed inefficient and requires several enhancements (Abdelazim et al, 2023).…”