Dividend Policy in Sub Saharan Africa: The Impact of Corporate Tax
- Post by: eraf
- January 6, 2023
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ABSTRACT
The study empirically explored the impact of taxation on the dividend policy of enterprises in Sub-Saharan Africa (SSA) using a firm-level panel data set comprised of 27 Ghanaian firms, 30 Nigerian firms, and 51 South African firms spanning the years 2010 to 2020. To estimate the data, the paper used a simultaneous panel regression model. The findings show that corporate tax has a significantly positive relationship with the dividend payout ratio in both South Africa and Ghana. In Nigeria, corporate tax has a significantly negative relationship with the dividend payout ratio. The findings indicate that, in South Africa and Ghana, companies pay dividends to shareholders to advertise the company’s worth to the public as a means of increasing demand for their shares, allowing them to raise the required sum of money from equity issuance at better prices. Firms that pay a higher corporate tax, on the other hand, pay lesser dividends to shareholders in Nigeria. The findings show that business profitability, taxes, leverage, and firm size all have an impact on dividend policy. The study’s findings undoubtedly have significant policy implications. This study suggests that firms focus on measures to decrease their tax bills, such as tax amnesty, tax holidays, and tax relief.
Keywords: Corporate Tax; Dividend Policy; Dividend Payout Ratio; Sub-Saharan Africa
Citation: Egiyi, M. A. (2022). Dividend Policy in Sub Saharan Africa: The Impact of Corporate Tax. European Review in Accounting and Finance, 6(2), 66-75. DOI: https://doi.org/10.5281/zenodo.10432854