The impact of Firm’s Life Cycle, Social Responsibility and the Quality of Accruals on Dividends Policy: An Applied Study on Listed Firms
in EGX-100 Index
Dr. Magdy Melegy Abdul Hakim Melegy
Assistant Professor, Department of Accounting
Faculty of Commerce, Benha University
Abstract:
Purpose: To investigate the impact of firm's life cycle stages, social responsibility, and the quality of earnings on the dividends policy.
Research Methodology: The current research adopted content analysis to the annual reports of a sample consisting 86 non-financial companies listed on the Egyptian Stock Exchange in EGX 100 index during the period from 2014 to 2018, with a total of (430) observation to test the study hypotheses that reflect the impact of firm’s life cycle stages (growth stage, maturity stage, decline stage), social responsibility, quality of accruals and the interactive relationships between them on the firm’s dividend policy, multiple regression was used to test the study hypotheses.
Conclusion and Recommendations: The results of this study indicated that the dividend’s distribution policy is positively and significantly related with the maturity stage of the firm’s life cycle, it is negatively related with both the growth and the decline stages, additionally it has a positive and significant relationship with both social responsibility and quality of earnings. Based on the current study results, the study recommends the need for managers to understand the importance of the dividend’s distribution decision as one of the financial decisions affecting both the goals and the value of the firm, and in which stage the firm is currently passing through as the firm may be subject to systemic changes during its life cycle that should affect its dividends policies. Moreover, the study draw the attention to social responsibility activities the necessity of its inclusion in the firm’s business strategy, as well as directing investors’ attention to the quality of accruals as an indication of a reduction in the management opportunistic practices and an increase in future cash flows.
Study Limitations: it is mainly related with the limits of the sample size and the methods of measuring the used variables, the current study focused on analyzing the impact of firm’s life cycle stages, social responsibility and the quality of accruals on the dividends policy in non-financial firms listed in EGX-100 index.
Practical Implications: The results of this study may be of interest to investors and firms when identifying the factors affecting the dividends’ distribution policy, Additionally it provides useful information to the accounting standards developers and regulatory authorities on the impact of firm’s life cycle stages, social responsibility and the quality of accruals on the tendency to distribute dividends and the amount of these distributions.
Originality and Value: This study contributes to the accounting literature by providing a practical evidence from the Egyptian business environment as one of the emerging economies on the impact of the firm’s life cycle stages, social responsibility, and the quality of accruals on the dividends’ distribution policy, that may contribute in reducing the research gap, additionally in expands the scope of research on the determinants of dividends’ distribution policy, which may reduce the debates in this concern and contributes in explaining the firm’s tendency to distribute dividends and the amount of these distributions.
Keywords:
Firm’s life cycle stages, social responsibility, quality of accruals, dividends policy, cash flows, EGX-100.
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