2134/7578
Enard Mutenheri
Enard
Mutenheri
The determinants of corporate financial policy in Zimbabwe: empirical evidence from company panel data
Loughborough University
2010
Zimbabwe
Financial policy
Capital structure
Dividend policy
firm characteristics
Corporate
Business and Management not elsewhere classified
2010-12-08 14:28:27
Thesis
https://repository.lboro.ac.uk/articles/thesis/The_determinants_of_corporate_financial_policy_in_Zimbabwe_empirical_evidence_from_company_panel_data/9495836
This thesis examines the patterns and determinants of corporate financial policy
(capital structure and dividend policy) in Zimbabwe. In particular it investigates
various aspects of corporate financial behaviour in an emerging market; the evolution
of corporate financial structure and dividend payout ratio over the past 25 years
(1975-1999), the impact of the reform programme (introduced in 1992) on firm
characteristics, the corporate financing patterns during the period 1990-1999, the
determinants of corporate capital structures and dividend policy and the interaction
between corporate financing and dividend policy decisions.
The main results that emerge from the analysis suggest that (i) the debt ratio for the
Zimbabwean corporate sector significantly increased after the reform (ii) the
Zimbabwean corporate sector mainly depends on external finance (75 % of total
financing) especially short-term finance, which contributes 52 % of total financing.
Furthermore, the results support the following hypotheses (i) the pecking order
hypothesis that firms prefer internal financing to external financing, (ii) the trade-off
hypothesis that non-debt tax shields reduce the expected gains from leverage, (iii)
firms use liquid assets to finance investments, (iv) the agency cost hypothesis that
increasing managerial ownership helps to align the interests of managers and
shareholders and therefore reduces the role of debt as an agency-conflict mitigating
factor, (v) large firms have lower bankruptcy costs and therefore can support more
debt than smaller firms, (vi) debt service limits the amount of cash paid out as
dividends, and (vii) high growth firms rely on external finance more than low growth
firms (viii) high growth and firms have low payout ratios (iv) Cash flows and
institutional investors increase the likelihood that firms will pay dividends (v) capital
structure and dividend policy decisions are interdependent and highly leveraged firms
have low payout ratios.