Corporate Dividend Policies and Ownership Structure in Listed Egyptian Companies

Purpose: To investigate (provide empirical testing) the effect of ownership structure on corporate dividend policies by top 50 Egyptian companies for the years 1998-2002 Design/ methodology / approach: Two dependent variables representing dividend policies; dividend decision and dividend yield are regressed on two test variables and five control variables. The test variables are majority government ownership and free float ratio. The control variables are growth opportunities (market value to book value and earnings per share), size, leverage, return on equity and industry type. Findings: The results confirm that firms with a majority government ownership and hence lower percentage of external ownership (free float) distribute higher levels of dividend. In the transitional period of the emerging market of Egypt, it is found that despite the majority government ownership and the closely held nature of the firms, which imply lower agency costs, the payment of higher dividend is considered necessary to attract capital. Companies with majority government ownership are planning to issue more shares for public subscription as part of the privatization programme. These companies are signalling their quality through higher dividends. No significant association was found between size, profitability or growth opportunities and dividend yield ratio in Egypt. Research limitations / implications: This study is subject to a number of limitations. First, majority government ownership was represented as a dummy variable, due to non-availability of data. However, the free float measure which represents the percentage of free float (percentage owned by outsiders other than founders and government) was used, although less significant. Second, there is no guarantee that the two measures used in this study adequately capture the corporate growth opportunities. However, the measures were used in a number of previous studies.