Drivers that shape corporate payout policy in South Africa

Abstract

This study sought to explore and develop a better understanding of the factors that drove corporate payout policy decisions in South Africa. Recent trends the world over indicate a growing trend of stock repurchases, largely at the expense of dividends, as the preferred payout method firms use to return excess cash. The study was inspired by the research work done by Brav et al., (2005) in the United States of America (US). The study was conducted using fifty survey responses from a sample size of 175 companies listed on the Johannesburg Stock Exchange. The results reported evidence that financial flexibility, catering theory of dividends and price support positively affected a company's payout policy choice. The results were mixed on the signalling theory as an important factor which confirmed the ambiguity of signalling theory. The South African results mirror those of the US results, and the study contributed to growing literature on factors that influence corporate payout policy decisions.