Board composition, ownership structure and dividend policies in an emerging market: Further evidence from CASE 50

Purpose – The purpose of this study is to examine dividend policies in an emerging capital market, in a country undergoing a transitional period.
Design/methodology/approach – Using pooled cross-sectional observations from the top 50 listed
Egyptian firms between 2003 and 2005, this study examines the effect of board of directors’ composition and ownership structure on dividend policies in Egypt.
Findings – It is found that there is a significant positive association between institutional ownership and firm performance, and both dividend decision and payout ratio. The results confirm that firms
with a higher return on equity and a higher institutional ownership distribute higher levels of
dividend. No significant association was found between board composition and dividend decisions or
ratios.
Originality/value – This study provides additional evidence of the applicability of the signalling
model in the emerging market of Egypt. It was found that despite the high institutional ownership
and the closely held nature of the firms, which imply lower agency costs, the payment of higher
dividend was considered necessary to attract capital during this transitional period.