Mabutho Sibanda

An evaluation of banking sector regulatory capital in a multicurrency economy: a case for Zimbabwe

Abstract This paper seeks to evaluate Zimbabwe’s banking sector capital requirements based on existing theory and evidence. Literature surveyed is used to critically evaluate the existing design of bank capital requirements. The study shows that all banks in Zimbabwe had fallen short of minimum capital requirements in 2012, prompting aggressive capital raising strategies in the banking sector. In this study, various implications of the new capital requirements for the banking industry and the economy in general are discussed. The discussion supports the increase in capital requirements in that bank stability and lending would be enhanced as a result of such increase in capital. This however comes at a cost as the weighted average cost of funds increases due to the use of additional equity in capital structure of banks which further adversely impacts on borrowers. Overall, the study shows that benefits of increasing capital requirements outweigh the costs. Further, a set of recommendations for three economic sectors, namely, the banking institutions, the central bank and the government, on ways to respond to the regulatory changes and standard regulatory capital requirements are outlined.

Dividend Payout, Retention Policy and Financial Performance in Commercial Banks: Any Causal Relationship?

Abstract Dividend policy remains one of the top ten unresolved issues in corporate finance including in the banking sector. Hence, this study explores data from 250 commercial banks in 30 Sub-Saharan African countries to establish the causal relationship between the use of two major dividend policies in the sector and financial performance for the period 2006 to 2015. The empirical results of the vector error correction block exogeneity Wald test and Pairwise Granger causality test reveal that only retention policies Granger cause performance (ROA), even though both major policies posit a positive relationship with performance (ROA) in the Vector Error Correction Model estimate. Therefore, commercial banks in Sub Saharan Africa and also in the entire world should use their free cash flows wisely by exploring all available viable investment opportunities. By doing this, not only owners’ profit but wealth is fully maximised such that their survival, value creation, and future growth is fully justified.

Do Firms Smooth Their Dividends Over Time? Evidence from the Johannesburg Stock Exchange

Abstract This study examines dividend payout policies and the appropriateness of Lintner’s dividend smoothing model on the Johannesburg Stock Exchange (JSE) listed firms. The ordinary least squares method is used to analyze the data using annual data from 1995 to 2011. The study found that the dividend smoothing model slightly overstates the payout ratio by two percent. The median long-run target payout ratio was found to be 40.76 percent compared to the actual payout ratio of 38.73 percent. The median speed of adjustment coefficient was 72.61 percent suggesting that firms partially adjust their dividends over time. The study concludes that despite the reduction in the number of dividend-paying firms in South Africa, the dividend smoothing model can be used to predict firms’ target payout ratios. This has implications for equity investors who rely on dividends for achieving their investment objectives.