The determinants of the dividend payout policy of large private Algerian firms: A GMM analysis over the period 2010-2020

Abstract

This dissertation examines corporate payout policies and their determinants in the context of Algeria’s emerging economy. Payout policies are a key mechanism through which firms distribute value to shareholders and signal financial performance, making their determinants of interest to investors, managers, and policymakers. The study explores the evolution of payout practices, highlighting the traditional dominance of cash dividends alongside the increasing use of share repurchases, driven by their flexibility and potential tax advantages. The analysis is grounded in established theoretical frameworks, including dividend irrelevance theory, the bird-in-the-hand hypothesis, and Lintner’s partial adjustment model. The research further investigates payout behavior in imperfect markets, focusing on the influence of taxation, asymmetric information, and agency conflicts on corporate distribution decisions. It also provides empirical evidence on payout policy using firm-level data, allowing for an assessment of theoretical predictions under real market conditions. Methodologically, the study employs panel data econometric techniques, including fixed effects, random effects, and dynamic models estimated via the Generalized Method of Moments (GMM), to address endogeneity and dynamic adjustment in payout behavior. The findings highlight significant sector heterogeneity in dividend policies, with manufacturing firms exhibiting more stable payout patterns compared to more volatile sectors such as agribusiness. Retail and services sectors display more balanced distribution strategies. The results further confirm that earnings and past dividends are the primary determinants of payout decisions, alongside profitability, liquidity, firm size, and growth opportunities, while macroeconomic and institutional factors also play a significant role. Overall, this research contributes to the limited literature on dividend policy in emerging markets by providing evidence from the Algerian context, characterized by family-owned firms and evolving financial structures. The findings offer implications for corporate financial strategy, investment decision-making, and policy development aimed at improving dividend practices and corporate governance.