TESTING THE DIVIDEND LIFE CYCLE THEORY: EVIDENCE FROM SELECTED SUB-SAHARAN AFRICAN COUNTRIES
TESTING THE DIVIDEND LIFE CYCLE THEORY: EVIDENCE FROM SELECTED SUB-SAHARAN AFRICAN COUNTRIES

Summary/Abstract: This paper undertakes a test of the dividend life cycle theory for quoted non-financial firms in selected Sub-Saharan African countries (Nigeria, South Africa, and Kenya). The causal and longitudinal research designs were utilized and four hundred and seventy-nine (479) non financial companies in eleven (11) sub-sectors listed on Nigerian, Johannesburg, and Nairobi Stock Exchanges make up the population. However, the Utility sector was removed from the final analysis because the sample size for this subsector was not enough to carry out the system GMM analysis. Thus, the analysis was done for ten (10) subsectors. The Taro Yamani and the sample filtering technique were utilized to ascertain the size of the sample. Two hundred and thirty-nine (239) quoted non- financial firms were chosen and data were collected for the period 2007 to 2017. For the data analysis, the system generalized method of moments dynamic panel data regression technique was employed. This was after testing for unit root and other diagnostic tests respectively. The outcome of the empirical analysis indicates that the firms retain Earnings/Total Equity (that is, earned/contributed capital mix) has no meaningful impact on dividend pay-out while firm age has a meaningful and negative impact on dividend pay-out. Thus, the finding of this research is not in tandem with the proposition of the dividend life cycle theory. The study recommended among others that shareholders must consider other means of sustaining dividends for firms since mere age will not guarantee dividend pay-out.

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