Dividend policy practice in emerging markets: the role of financial flexibility

Purpose This study aims to examine the dividend policy practices of listed non-financial firms and the determinants and also the interactive effect of financial flexibility. It further compares the dividend policy practice of local and foreign firms in Nigeria. Design/methodology/approach This study uses data from 57 listed non-financial firms over the period 2011–2021 and uses the generalized method of moment (GMM) estimation technique. Findings The key findings show that foreign firms paid more dividend than local firms. All firm characteristics (except tax) have a significant effect on dividend. Profitability and firm size increase the payment of dividend, whereas firm growth, leverage, tax and financial flexibility decrease the payment of dividend in general. For the local firms, profitability, tax and firm size increased the dividend payment, whereas firm growth, leverage and financial flexibility discouraged the payment of dividend. For foreign firms, profitability, firm growth, firm size and financial flexibility increase the payment of dividend, whereas leverage and tax discourage the payment of dividend. It is also evident that financial flexibility moderates the relationship between tax and dividend payment for firms in general, firm growth, leverage and dividend payment of local firms and all firm characteristics and dividend payment of foreign firms. Originality/value This study contributes to existing literature on dividend policy and firm characteristics by comparing the dividend policy practice of local and foreign firms in Nigeria and also the role of financial flexibility.