Abstract:
Dividend payouts are the major source of income for shareholders. Consequently,
academics, financial analysts and policy makers have carried out extensive research to
establish the factors that influence a firm's dividend payout policy. Though studies have
demonstrated that ownership structure affects dividend payout policy, existing
empirical literature shows conflicting and inconclusive findings. From this background,
this study sought to investigate whether growth opportunities moderate the relationship
between ownership structure and dividend payout policy among firms listed in the East
Africa Community’s stock and securities exchanges. Specifically, the study examined
the effect of institutional ownership, managerial ownership, government ownership and
foreign ownership on dividend payout policy. The study further assessed the
moderating effect of growth opportunities on the relationship between; institutional
ownership, managerial ownership, government ownership, foreign ownership and
dividend payout policy. The study was grounded on the agency theory and the pecking
order theory. The study adopted both the longitudinal and explanatory research design.
The study targeted all the 122 listed firms in the East Africa Community partner states
between 2011 and 2021. However, after applying an inclusion/exclusion criterion the
final sample comprised of 57 firms. The data was secondary in nature and was extracted
from the annual financial statements through content analysis. Data was analyzed
through descriptive and inferential statistics. The study adopted the hierarchical
regression models to test for moderation and the choice between fixed and random
effect was based on the results of Hausman test. Based on the regression results, the
study found that institutional ownership (β= -0.1250; ρ< 0.05), managerial ownership
(β= -0.4469; ρ< 0.05), government ownership (β= 0.6926; ρ< 0.05) and foreign
ownership (β= 0.2440; ρ< 0.05) had a significant effect of dividend payout policy with
an R 2 of 23.33 percent. The study further found that growth opportunities moderated
the relationship between institutional ownership (β= -0.0732; ρ< 0.05), managerial
ownership (β= 0.1982; ρ< 0.05), government ownership (β= 0.1982; ρ< 0.05), foreign
ownership (β= -0.2777; ρ< 0.05) and dividend payout policy with an R 2 of 30.15
percent. The study concluded that the various forms of ownership are key determinants
of dividend payout policy among listed firms in the East Africa Community partner
states and firms’ growth opportunities influence that relationship. The study's
conclusions have implications for managers and regulators. First, managers need to
understand the varying interests of shareholders when making decisions relating to
financing growth opportunities and payment of dividends. Secondly, while developing
corporate governance codes for listed firms, regulators should consider the role played
by corporate owners as well as firm dynamics such as growth opportunities. The study
recommends that future studies should explore the contextual factors that shape the
relationship between ownership structure, growth opportunities, and dividend payout
policy in the EAC such as legal and regulatory frameworks.