Capital structure, corporate cash holding and dividend policy in African countries

摘要

This thesis centres on capital structure, corporate cash holdings, and dividend policy in African countries. Three different areas of research are followed and, employing different estimation techniques and methods, this thesis offers the following results: Firstly, the leverage trends across the countries are very low and stable, with country and firm specific factors playing a significant role in determining the level of leverage. Secondly, corporate cash holdings in the countries are significantly determined by the firm level factors with stable trends. Thirdly, dividend payers are more profitable, have larger firm size, greater investment, high retention of earnings and less financial leverage than non-paying firms. In countries where GDP is low, firms are likely to pay dividends, and non-payers of dividends have high levels of corruption. Country and firm factors are significant in determining dividend.The thesis makes the following contributions to the literature: First and foremost, the dataset used covers a much longer period and a larger sample of African firms. Secondly, there is a cross-country comparison, which is rare in most previous studies. Also, both firm and country specific factors were considered when determining the relationships. More importantly, the thesis is the first research to confirm that Pecking order and Trade off theories are robust vehicles for explaining differentials in capital structure and corporate cash holdings in Africa.In conclusion, this thesis provides the following public policy recommendations: Governments should strengthen their institutional frame-works for good governance and rule of law, and support the capital and stock markets to attract investment, and also have a positive effect on business and industry. They should also ensure efficient management of the banking sector operations in order to reduce the interest rate by reducing inflation, and encourage domestic savings and their sustainability, thereby boosting the financing of firms and private sector development to create more job opportunities and growth. Finally, policy makers need to set up special funds which firms can tap into for research and development, to develop innovative ideas, introduce policies against political instability, corruption and political manipulation, to ensure total economic growth.