Determinants of Dividends decisions cum dividend derivatives in Botswana and Zimbabwe

Abstract

The study examines the determinants of dividends decisions alongside dividends derivatives in Botswana and Zimbabwe. Further the study explored the importance of dividends derivatives for companies listed on both Stock Exchanges. The study was based on a mixed methods research approach. The research used simple random sampling of non-financial firms for the determination of dividend decisions. Documentary review research was also deployed in assessing the significance of dividends derivatives. The study was based on a sample of 27 companies listed on the Botswana and Zimbabwe Stock exchanges. Unit root analysis, test of normality, test of fixed effects and Granger causality tests were applied to evaluate the determinants of the of dividend decisions. Logistic regression analysis was applied to investigate the determinants of dividend decisions in Botswana and Zimbabwe. Granger causality was deployed to investigate the impact of short-term relationships influencing the propensity for dividend payout. The binary logit study revealed that the significant positive determinants of dividends payout were past dividends, investors preferences, derivative hedge and industry type. The fixed effect model revealed that a Chief Financial Officer possessing more than 15 years of experience, had a significant positive propensity for dividend payout in both countries. Firm size and free cash flows were viewed as having a significant and negative propensity for dividend payout from the fixed effect model. The determinants of dividend derivatives were identified as the rise of decrement indices, economic uncertainties and pandemic risks. The benefits of dividend derivatives were found as protection of investors against dividend risks during periods of existential threats, economic vulnerabilities and uncertainties.