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Allocation of internally generated corporate cash flow in Africa

Allocation of internally generated corporate cash flow in Africa
Allocation of internally generated corporate cash flow in Africa
We examine how managers of African firms, operating in environments characterised by less developed capital markets and weak institutional structures, make use of their internally generated cash flows. We find that managers of African firms hold most of their internally generated cash flows, and when they decide to spend, they allocate a higher proportion towards dividend payments; followed by leverage adjustments; then to investments; and lastly, to equity repurchases. These allocations are consistent with the existence of a significant financial constraint in African markets, and the use of dividends to signal credit quality in relatively underdeveloped capital markets.
2042-1168
495-513
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4
Agyei-Boapeah, Henry
37005f29-d453-458e-b6b5-cd92e55587a4

Agyei-Boapeah, Henry (2018) Allocation of internally generated corporate cash flow in Africa. Journal of Accounting in Emerging Economies, 8 (4), 495-513. (doi:10.1108/JAEE-10-2017-0099).

Record type: Article

Abstract

We examine how managers of African firms, operating in environments characterised by less developed capital markets and weak institutional structures, make use of their internally generated cash flows. We find that managers of African firms hold most of their internally generated cash flows, and when they decide to spend, they allocate a higher proportion towards dividend payments; followed by leverage adjustments; then to investments; and lastly, to equity repurchases. These allocations are consistent with the existence of a significant financial constraint in African markets, and the use of dividends to signal credit quality in relatively underdeveloped capital markets.

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Published date: 5 November 2018
Additional Information: © Emerald Publishing Limited 2018. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details.

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Local EPrints ID: 434319
URI: https://eprints.soton.ac.uk/id/eprint/434319
ISSN: 2042-1168
PURE UUID: 31f3d7b0-1b7f-401b-94cb-d84fbbd63722
ORCID for Henry Agyei-Boapeah: ORCID iD orcid.org/0000-0003-4798-6324

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Date deposited: 19 Sep 2019 16:30
Last modified: 10 Dec 2019 01:20

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