Abstract:
BACKGROUND : The dividend payout policy remains one of the key functional areas of corporate
finance because it is through receipt of dividends that shareholders can share in the profits of
their investments. Amongst the dividend payout theories that have been developed over the
decades, the life-cycle hypothesis has received little attention in research.
AIM : The aim of this study was to test the dividend life-cycle hypothesis in the South African
contex.
MOTIVATION FOR THE STUDY : Justification for this study in the context of South Africa is that there
is minimal research in this regard in emerging economies. South Africa presents a good
platform for this research because it is amongst the highly regarded emerging markets and this
has been confirmed by its representation in Brazil, Russia, India, China and South Africa (BRICS)
countries. Hence, results in this regard would shed some light in the form of a relative
representation of overall emerging markets trend.
RESEARCH APPROACH/DESIGN AND METHOD : A panel data of 119 Johannesburg Stock Exchange
(JSE) listed sample companies were used to test the hypothesis during the period 2006–2015. A
combination of basic and dynamic panel data estimators was used to analyse the data.
MAIN FINDINGS : The study finds that the dividend life-cycle hypothesis is prevalent
amongst South African companies. Specifically, it was observed that the considered
companies pursuing growth projects paid less dividends. Furthermore, the growth companies have shown to be more aggressive in their pursuit for growth and hence are able to create more
value for shareholders than value for companies.
MANAGERIAL IMPLICATIONS : Financial managers will be afforded with enhanced decision
alternatives in respect of their fiduciary duties towards the shareholders in respect of
maximising value.
CONCLUSION : These results provide a mirror image of those of the developed markets and
a good context for future research in the same area in an emerging economy setting.
