Allocation of internally generated corporate cash flow in Africa

Henry Agyei-Boapeah, Michael Machokoto

Research output: Contribution to journalArticleResearchpeer-review

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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.
Original languageEnglish
Article numberJAEE-10-2017-0099
Pages (from-to)495-513
Number of pages19
JournalJournal of Accounting in Emerging Economies
Volume8
Issue number4
DOIs
Publication statusPublished - 1 Aug 2018

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Africa
Cash flow
Managers
Capital markets
Dividends
Proportion
Payment
Repurchase
Institutional structure
Leverage
Credit
Equity
Financial constraints

Keywords

  • Financial constraints
  • cash flow
  • cash holdings
  • investments
  • dividend
  • Africa

Cite this

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Allocation of internally generated corporate cash flow in Africa. / Agyei-Boapeah, Henry; Machokoto, Michael.

In: Journal of Accounting in Emerging Economies, Vol. 8, No. 4, JAEE-10-2017-0099, 01.08.2018, p. 495-513.

Research output: Contribution to journalArticleResearchpeer-review

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