article · African Journal of Economic and Management Studies
Listed companies in the East African Community display specific financial behaviours regarding cash reserves, ownership structures, and shareholder returns. An analysis of thirty-three listed firms between 2011 and 2022 reveals that cash holdings maintain a positive and significant link with dividend payouts, meaning firms with higher cash reserves distribute more dividends. Conversely, institutional ownership shows a significant negative relationship with dividend distributions. Furthermore, institutional ownership acts as a moderating factor in the link between cash reserves and dividend payouts. These patterns, confirmed across multiple econometric estimation techniques using audited financial statements, highlight how corporate governance and liquidity jointly influence financial distributions. Understanding these dynamics assists managers in balancing liquidity with shareholder expectations, while guiding regional regulators seeking to support investor confidence through targeted corporate governance and distribution frameworks.
Decisions regarding corporate cash and dividend distributions directly affect shareholder returns and corporate financial health. By clarifying how institutional owners influence the relationship between liquidity and payouts, this research offers guidance to corporate executives balancing reinvestment against dividends. It also provides insights for regional financial regulators and investors evaluating governance structures in developing markets across East Africa.
The findings inform corporate financial strategy and governance policy rather than commercial product development. Financial analysts, institutional investors, and fund managers can use these empirical relationships to assess dividend sustainability and corporate governance risks in East African equities. The insight is directly applicable to corporate advisory, portfolio management, and policy design for capital market authorities seeking to optimise corporate payout regulations in the region.
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Purpose This study seeks to examine the moderating effect of institutional ownership on the relationship between cash holding and dividend payout among listed firms in the East Africa Community. Design/methodology/approach The study used a sample of 33 East African Community listed firms over the period of 2011–2022 collected from published audited financial statements. To test the hypothesized relationships, this study used ordinary least squares (OLS). To validate the results, the study employed additional estimation models which comprises of logistic regression, fixed effect and system generalized methods of moments for robustness. Findings The empirical findings indicated that cash holding is significantly and positively associated with dividend payout, while institutional ownership had a negative and significant effect on dividend payout. In addition, the findings revealed that institutional ownership moderated the relationship between cash holding and dividend payout. Research limitations/implications Future researchers may investigate the relationship dividend payout and other forms of ownership and exploring firms that are not listed as well as those in other jurisdictions. Practical implications The findings of this study may have implication to managers, policymakers, investors and academia. For instance, policy makers and regulators may improve dividend payout for East African Community listed firms by considering the effect of cash holding and institutional ownership. Originality/value This study extends the literature by examining whether institutional ownership moderates the relationship between cash holding and dividend payout from a developing region perspective; a gap that is missing in existing literature.
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DOI: 10.1108/ajems-07-2024-0408
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