Shariah-compliant firms (SCF) cannot use debt to mitigate agency problems, and in this scenario the dividend payout policy becomes a highly important tool of corporate governance for shariah-compliant investors. This chapter highlights the dividend payout behaviour of SCF by comparing them to conventional firms. We performed a detailed review of existing literature and also calculated descriptive statistics, using various specifications using a sample of representative SCF and market firms for United States (US) market from 2006-2015, in order to investigate if the dividend payout behaviour of SCF differs from the market. However, we did not find any notable difference. Our results also showed no difference in payout decisions at different levels of idiosyncratic risk. In summary, we observed that firms with good governance, large asset size, higher profitability, higher Retained Earnings/Total Earnings (RE/TE) and lower market-book ratio, lower idiosyncratic risk and lower financial constraints, on average, pay higher dividends. The results remain similar across both kinds of firms.
Dividend policy: The case of Shariah-compliant firms
Paltrinieri A.
2019-01-01
Abstract
Shariah-compliant firms (SCF) cannot use debt to mitigate agency problems, and in this scenario the dividend payout policy becomes a highly important tool of corporate governance for shariah-compliant investors. This chapter highlights the dividend payout behaviour of SCF by comparing them to conventional firms. We performed a detailed review of existing literature and also calculated descriptive statistics, using various specifications using a sample of representative SCF and market firms for United States (US) market from 2006-2015, in order to investigate if the dividend payout behaviour of SCF differs from the market. However, we did not find any notable difference. Our results also showed no difference in payout decisions at different levels of idiosyncratic risk. In summary, we observed that firms with good governance, large asset size, higher profitability, higher Retained Earnings/Total Earnings (RE/TE) and lower market-book ratio, lower idiosyncratic risk and lower financial constraints, on average, pay higher dividends. The results remain similar across both kinds of firms.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
