Journal of Applied Finance & Banking

Determinants of Corporate Dividend Policy under Hyperinflation and Dollarization by Firms in Zimbabwe

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•  Abstract

   

  Studies examining dividend policy within a developing market in the context of hyperinflation and dollarization are scarce. This study investigates the possibility of non-linearity in the determinants of corporate dividend policy; assessed how dividend policy is affected by other financial decisions and tests the applicability of the Lintner model. Panel ordinary least squares (OLS) and generalized methods of moments (GMM) techniques were employed for Zimbabwe listed, 2000 to 2016. The Lintner model is applicable under hyperinflation only and it can be specified as a non-linear function. The study confirms the existence of non-linearity between dividend policy and selected explanatory variables using an extended Lintner model. Furthermore, financing and investment decisions are important in explaining dividend policy. Corporate dividend policy should be developed in view of the future growth prospects, ownership concentration and shifts in monetary policy by the central bank. The policy should be sensitive to prevailing market conditions.

   

  JEL classification numbers: G320, G350, G390.

  Keywords: Dividend Policy, Hyperinflation, Dollarization, Linter Model, Zimbabwe