Introduction - University of KwaZulu-Natal
University of KwaZulu-NatalCollege of Law and Management StudiesSchool of Accounting, Economics & FinanceDoes Simultaneity between Cash Holding and Dividend Policies hold in Zimbabwe’s Multiple Currency System?Shepard MunyariandFarai KwendaSAEF Working Paper No. 2016/01/02May 2016Does simultaneity between cash holding and dividend policies hold in Zimbabwe’s multiple currency system? Shepard Munyari Farai Kwenda (PhD)**AbstractThis paper examined cash holding and dividend policies employed by listed companies operating in Zimbabwe’s multiple currency system. Determinants of corporate dividend and cash holdings determinants were investigated. Using panel data regression methods on the panel data obtained from financial statements of 58 non-financial firms registered at the Zimbabwe Stock Exchange (ZSE) from 2009 to 2014 to determine if simultaneity exists between dividend policy and corporate cash holdings policy. The study found that dividend payment policy and cash holdings policy influence each other. In addition, dividend and cash holdings are both influenced by common variables namely leverage, working capital ratio and business risk which confirms the existence of simultaneous relationship between dividend and corporate cash holdings policies. In line with these findings, the study concluded that it is of paramount importance for financial managers formulate corporate dividend policy and corporate cash holdings simultaneously while at the same time paying special attention to the debt ratio, working capital resources and prevailing business risk.Key Words: dividend policy, cash holding policy, transitional economyIntroductionFinancial management is regarded as an important category of business management. The key financial management decisions are; capital budgeting, capital structure, working capital management and the distribution decision. The distribution decision involves decisions about paying out earnings as a dividends versus retaining them in the business to support future growth. Companies should devise strategies and policies of rewarding its equity investors in monetary terms or otherwise to meet their return on investment expectations ADDIN EN.CITE <EndNote><Cite><Author>Uwuigbe</Author><Year>2012</Year><RecNum>94</RecNum><DisplayText>(Uwuigbe, Jafaru, & Ajayi, 2012)</DisplayText><record><rec-number>94</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071947">94</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Uwuigbe, Uwalomwa</author><author>Jafaru, Jimoh</author><author>Ajayi, Anijesushola</author></authors></contributors><titles><title>Dividend policy and firm performance: A study of listed firms in Nigeria</title><secondary-title>Accounting and Management Information Systems</secondary-title></titles><periodical><full-title>Accounting and Management Information Systems</full-title></periodical><pages>442</pages><volume>11</volume><number>3</number><dates><year>2012</year></dates><isbn>1843-8105</isbn><urls></urls></record></Cite></EndNote>(Uwuigbe, Jafaru, & Ajayi, 2012). ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Inselbag</Author><Year>2007</Year><RecNum>103</RecNum><DisplayText>Inselbag (2007)</DisplayText><record><rec-number>103</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464080430">103</key></foreign-keys><ref-type name="Serial">57</ref-type><contributors><authors><author>Inselbag, I</author></authors></contributors><titles><title>Why do companies pay dividends: </title><secondary-title>Working Paper Series </secondary-title></titles><volume>15</volume><num-vols>83</num-vols><dates><year>2007</year></dates><pub-location>The Wharton School, University of Pennsylvania, Philadephia</pub-location><urls></urls></record></Cite></EndNote>Inselbag (2007) explained that dividend payment by companies is necessary to increase the company share price and therefore, the company value. Cash holding is part of the working capital management decisions that managers make in order to make sure that the company has enough resources to keep its operations running without costly disruptions. It is about making sure that the company the right amount of cash at all times. Holding excessive cash levels causes the firms to get loss because of low returns on cash and marketable securities. Low levels of cash may cause difficulties in meeting obligations as and when they fall due. Despite the compelling reasons to pay dividends companies often find it difficult to declare and pay dividends to its shareholders. Dividend payments are normally difficult for companies operating in a challenging economic environment like Zimbabwe. From 1999 to 2008 Zimbabwe experienced severe socio-economic and political crises which almost brought the whole country to its knees. The inflation rate rose from 15.8 percent in January 1997 ADDIN EN.CITE <EndNote><Cite><Author>Ministry of Finance</Author><Year>2006</Year><RecNum>1</RecNum><DisplayText>(Ministry of Finance, 2006)</DisplayText><record><rec-number>1</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1433325464">1</key></foreign-keys><ref-type name="Government Document">46</ref-type><contributors><authors><author>Ministry of Finance, (MOF)</author></authors></contributors><titles><title>Budget Statement </title></titles><dates><year>2006</year></dates><pub-location>Harare</pub-location><publisher>Government Printers</publisher><urls></urls></record></Cite></EndNote>(Ministry of Finance, 2006) to 231 150 888.87 percent in July 2008 ADDIN EN.CITE <EndNote><Cite><Author>Central Statistical Office</Author><Year>2008</Year><RecNum>95</RecNum><DisplayText>(Central Statistical Office, 2008)</DisplayText><record><rec-number>95</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464072027">95</key></foreign-keys><ref-type name="Government Document">46</ref-type><contributors><authors><author>Central Statistical Office, (CSO)</author></authors></contributors><titles><title>Monthly updates.</title></titles><dates><year>2008</year></dates><pub-location>Harare</pub-location><publisher>Central Statistical Office</publisher><urls></urls></record></Cite><Cite><Author>Central Statistical Office</Author><Year>2008</Year><RecNum>95</RecNum><record><rec-number>95</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464072027">95</key></foreign-keys><ref-type name="Government Document">46</ref-type><contributors><authors><author>Central Statistical Office, (CSO)</author></authors></contributors><titles><title>Monthly updates.</title></titles><dates><year>2008</year></dates><pub-location>Harare</pub-location><publisher>Central Statistical Office</publisher><urls></urls></record></Cite></EndNote>(Central Statistical Office, 2008). The unemployment rate was above 80 percent and industry utilization rates of below 10 percent ADDIN EN.CITE <EndNote><Cite><Author>Zinyama</Author><Year>2014</Year><RecNum>89</RecNum><DisplayText>(Zinyama & Takavarasha, 2014)</DisplayText><record><rec-number>89</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071576">89</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Zinyama, Tawanda</author><author>Takavarasha, Prosper ET</author></authors></contributors><titles><title>Zimbabwe’s Government of National Unity: Harvest of Thorns?</title><secondary-title>International Journal of Asian Social Science</secondary-title></titles><periodical><full-title>International Journal of Asian Social Science</full-title></periodical><pages>444-459</pages><volume>4</volume><number>3</number><dates><year>2014</year></dates><urls></urls></record></Cite></EndNote>(Zinyama & Takavarasha, 2014). Zimbabwe reported a whopping 47.26 percent cumulative decline between 1999 and 2007 ADDIN EN.CITE <EndNote><Cite><Author>International Monetary Fund</Author><Year>2008</Year><RecNum>25</RecNum><DisplayText>(International Monetary Fund, 2008)</DisplayText><record><rec-number>25</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1433577433">25</key></foreign-keys><ref-type name="Aggregated Database">55</ref-type><contributors><authors><author>International Monetary Fund, (IMF)</author></authors></contributors><titles><title>World Economic Outlook Database, October 2008</title></titles><dates><year>2008</year><pub-dates><date>20/05/2013</date></pub-dates></dates><pub-location>Washington, D. C: , United States of America.</pub-location><publisher>International Monetary Fund</publisher><urls><related-urls><url>;(International Monetary Fund, 2008) in its Real Gross Domestic Product (RGDP). In February 2009, Zimbabwe ditched its worthless Zimbabwean dollar (ZWD) and adopted the multiple-currency system. Change in national economic policies and formation of a government of national unity in 2009 changed the economic fortunes of the country. Thus, the country has been in an economic transitional period since 2009. Table 1 shows that the country managed to tame the inflation dragon and register positive economic growth. Capacity utilization in the manufacturing sector increased in the first three years of the multi-currency regime. From 2012 to 2014 the economy stagnated though inflation has remained under control. Capacity utilisation has declined from 57% in 2011 to 36% in 2014. The slowdown of the economy has been attributed to several structural challenges prevalent in the economy.Table SEQ Table \* ARABIC 1: Real GDP growth and Capacity Utilisation of Zimbabwe’s Manufacturing Firms Year 2008200920102011201220132014RGDP growth rate 5.4%9.6%10%4.4%4.5%3.1%Capacity Utilisation10%32.3%43.7%57.2%44.9%39.6%36.3%Annual inflation rate -3.1%3.5%3.7%1.6%-0.2%Source: PEVuZE5vdGU+PENpdGUgQXV0aG9yWWVhcj0iMSI+PEF1dGhvcj5NaW5pc3RyeSBvZiBGaW5hbmNl
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ADDIN EN.CITE.DATA Confederation of Zimbabwe Industries (2010); (Confederation of Zimbabwe Industries, 2011, 2012, 2013, 2014)Despite some economic positives since the adoption of the multiple currency system in 2009, the economic environment is still challenging for businesses. The challenges in the operating environment include liquidity challenges, raw materials shortage, high costs of doing business, power and water shortages, competition from imports, aging machinery, low demand of produced products on the local market and funding constraints ( ADDIN EN.CITE <EndNote><Cite><Author>Mahembe</Author><Year>2014</Year><RecNum>78</RecNum><DisplayText>(Mahembe & Odhiambo, 2014)</DisplayText><record><rec-number>78</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070970">78</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Mahembe, Edmore</author><author>Odhiambo, Nicholas M</author></authors></contributors><titles><title>A critical review of FDI inflows and economic growth in low-income SADC countries: prospects and challenges</title><secondary-title>Problems and Perspectives in Management</secondary-title></titles><periodical><full-title>Problems and Perspectives in Management</full-title></periodical><pages>7-16</pages><volume>12</volume><dates><year>2014</year></dates><urls></urls></record></Cite></EndNote>(Mahembe & Odhiambo, 2014). Given these challenges it is important to study the dividend and cash holding policies being employed by Zimbabwean companies, the determinants of such dividend and cash holding policies and if simultaneity between dividend and cash holdings policies. The rest of the paper is organized as follows: Section 2 briefly reviews the literature on dividend and cash holdings policies and the development of hypothesis. Data sources and the sample are described in Section 3. Section 4 presents and analyses the principal findings of the study. The conclusion of the study is presented Section 5.Literature ReviewThis section reviews existing literature on corporate dividend and cash holdings policies, in order to a lay a foundation for suitable dividend policies for companies operating in Zimbabwe’s multiple currency economy. The determinants of corporate dividend and cash holdings policies for Zimbabwe’s multiple currency economy were considered in the context of the simultaneity that exists between corporate dividend policy and corporate cash holdings policy, existing literature on cash holdings policy and the simultaneous relationship between corporate dividend policy and corporate cash holdings policy were considered in this section. Dividend payment is a distribution or appropriation of profit to shareholders ADDIN EN.CITE <EndNote><Cite><Author>Badu</Author><Year>2013</Year><RecNum>60</RecNum><DisplayText>(Badu, 2013)</DisplayText><record><rec-number>60</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070768">60</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Badu, Ebenezer Agyemang</author></authors></contributors><titles><title>Determinants of Dividend Payout Policy of listed Financial Institutions in Ghana</title><secondary-title>Research Journal of Finance and Accounting</secondary-title></titles><periodical><full-title>Research Journal of Finance and Accounting</full-title></periodical><pages>184-190</pages><volume>4</volume><number>7</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>(Badu, 2013). On the other hand, dividend policy refers to “the practice that management follows in making dividend payout decisions or, in other words, the size and pattern of cash distributions over time to shareholders” ADDIN EN.CITE <EndNote><Cite><Author>Lease</Author><Year>1999</Year><RecNum>77</RecNum><DisplayText>(Lease, John, Kalay, Loewenstein, & Sarig, 1999)</DisplayText><record><rec-number>77</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070892">77</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Lease, Ronald C</author><author>John, Kose</author><author>Kalay, Avner</author><author>Loewenstein, Uri</author><author>Sarig, Oded H</author></authors></contributors><titles><title>Dividend Policy:: Its Impact on Firm Value</title><secondary-title>OUP Catalogue</secondary-title></titles><periodical><full-title>OUP Catalogue</full-title></periodical><dates><year>1999</year></dates><urls></urls></record></Cite></EndNote>(Lease, John, Kalay, Loewenstein, & Sarig, 1999). There are two broad types of dividend policies, namely cash dividend policies and non-cash dividend policies ADDIN EN.CITE <EndNote><Cite><Author>Firer</Author><Year>2012</Year><RecNum>8</RecNum><DisplayText>(Firer, Ross, Westerfield, & Jordan, 2012)</DisplayText><record><rec-number>8</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1433326309">8</key></foreign-keys><ref-type name="Book">6</ref-type><contributors><authors><author>Firer, C.</author><author>Ross, S. A.</author><author>Westerfield, R. W.</author><author>Jordan, B. D. </author></authors></contributors><titles><title>Fundamentals of Corporate Finance</title></titles><edition>5th Ed</edition><dates><year>2012</year></dates><pub-location>Berkshire </pub-location><publisher>McGraw-Hill Education </publisher><urls></urls></record></Cite></EndNote>(Firer, Ross, Westerfield, & Jordan, 2012). The cash dividend policies include the residual dividend approach, stable dividend approach and compromise dividend approach while non cash dividend policies comprise of share repurchase, script issue and share split ADDIN EN.CITE <EndNote><Cite><Author>Firer</Author><Year>2012</Year><RecNum>8</RecNum><DisplayText>(Firer et al., 2012)</DisplayText><record><rec-number>8</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1433326309">8</key></foreign-keys><ref-type name="Book">6</ref-type><contributors><authors><author>Firer, C.</author><author>Ross, S. A.</author><author>Westerfield, R. W.</author><author>Jordan, B. D. </author></authors></contributors><titles><title>Fundamentals of Corporate Finance</title></titles><edition>5th Ed</edition><dates><year>2012</year></dates><pub-location>Berkshire </pub-location><publisher>McGraw-Hill Education </publisher><urls></urls></record></Cite></EndNote>(Firer et al., 2012).Cash holdings refer to the cash on hand or cash available for investment in physical assets and to distribute to investors ADDIN EN.CITE <EndNote><Cite><Author>Gill</Author><Year>2012</Year><RecNum>66</RecNum><DisplayText>(Gill & Shah, 2012)</DisplayText><record><rec-number>66</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070806">66</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Gill, Amarjit</author><author>Shah, Charul</author></authors></contributors><titles><title>Determinants of corporate cash holdings: Evidence from Canada</title><secondary-title>International Journal of Economics and Finance</secondary-title></titles><periodical><full-title>International Journal of Economics and Finance</full-title></periodical><pages>70</pages><volume>4</volume><number>1</number><dates><year>2012</year></dates><isbn>1916-9728</isbn><urls></urls></record></Cite></EndNote>(Gill & Shah, 2012). According to ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Damodaran</Author><Year>2005</Year><RecNum>62</RecNum><DisplayText>Damodaran (2005)</DisplayText><record><rec-number>62</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070782">62</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Damodaran, Aswath</author></authors></contributors><titles><title>Dealing with cash, cross holdings and other non-operating assets: Approaches and implications</title><secondary-title>Cross Holdings and Other Non-Operating Assets: Approaches and Implications (September 30, 2005)</secondary-title></titles><periodical><full-title>Cross Holdings and Other Non-Operating Assets: Approaches and Implications (September 30, 2005)</full-title></periodical><dates><year>2005</year></dates><urls></urls></record></Cite></EndNote>Damodaran (2005), firms have to decide on how much cash they should hold because cash holdings are important to firms. 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ADDIN EN.CITE.DATA (Al-Amri, Al-Busaidi, & Akguc, 2015; Baskin, 1987; Damodaran, 2005; Opler, Pinkowitz, Stulz, & Williamson, 2001; Sánchez & Yurdagul, 2013). Firms should therefore maintain adequate cash holdings to meet the above. According to ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Damodaran</Author><Year>2005</Year><RecNum>62</RecNum><DisplayText>Damodaran (2005)</DisplayText><record><rec-number>62</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070782">62</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Damodaran, Aswath</author></authors></contributors><titles><title>Dealing with cash, cross holdings and other non-operating assets: Approaches and implications</title><secondary-title>Cross Holdings and Other Non-Operating Assets: Approaches and Implications (September 30, 2005)</secondary-title></titles><periodical><full-title>Cross Holdings and Other Non-Operating Assets: Approaches and Implications (September 30, 2005)</full-title></periodical><dates><year>2005</year></dates><urls></urls></record></Cite></EndNote>Damodaran (2005) the adequacy of cash holdings is determined in terms of three measurements, which are cash as a percentage of market value of firm, cash as a percentage of book value of all assets and cash as a percentage of firm’s revenues. Thus, cash holdings policy relates to the cash target ratio given by any of the three measurements. The choices of corporate dividend policy and corporate cash holdings policy are determined by various factors. Existing literature points to the fact that the two corporate policies are influenced by common factors that are explained below.Determinants of cash holdings and dividend policies: hypotheses developmentFirm Size: Firm size is defined as the natural logarithm of sales or assets ADDIN EN.CITE <EndNote><Cite><Author>Kowalewski</Author><Year>2007</Year><RecNum>75</RecNum><DisplayText>(Kowalewski, Stetsyuk, & Talavera, 2007; Ullah, Fida, & Khan, 2012)</DisplayText><record><rec-number>75</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070872">75</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Kowalewski, Oskar</author><author>Stetsyuk, Ivan</author><author>Talavera, Oleksandr</author></authors></contributors><titles><title>Do Corporate Governance and Ownership Determine Dividend Policy in Poland?</title><secondary-title>Bank i Kredyt</secondary-title></titles><periodical><full-title>Bank i Kredyt</full-title></periodical><pages>60-86</pages><number>11-12</number><dates><year>2007</year></dates><isbn>0137-5520</isbn><urls></urls></record></Cite><Cite><Author>Ullah</Author><Year>2012</Year><RecNum>92</RecNum><record><rec-number>92</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071602">92</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Ullah, Hamid</author><author>Fida, Asma</author><author>Khan, Shafiullah</author></authors></contributors><titles><title>The impact of ownership structure on dividend policy evidence from emerging markets KSE-100 Index Pakistan</title><secondary-title>International Journal of Business and Social Science</secondary-title></titles><periodical><full-title>International Journal of Business and Social Science</full-title></periodical><volume>3</volume><number>9</number><dates><year>2012</year></dates><isbn>2219-1933</isbn><urls></urls></record></Cite></EndNote>(Kowalewski, Stetsyuk, & Talavera, 2007; Ullah, Fida, & Khan, 2012). A positive relationship exists between dividend policy and firm size ADDIN EN.CITE <EndNote><Cite><Author>Mehta</Author><Year>2012</Year><RecNum>80</RecNum><DisplayText>(Mehta, 2012; Uwuigbe et al., 2012)</DisplayText><record><rec-number>80</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070984">80</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Mehta, Anupam</author></authors></contributors><titles><title>An Empirical Analysis of Determinants of Dividend Policy-Evidence from the UAE Companies</title><secondary-title>Global Review of Accounting and Finance</secondary-title></titles><periodical><full-title>Global Review of Accounting and Finance</full-title></periodical><pages>18-31</pages><volume>3</volume><number>1</number><dates><year>2012</year></dates><urls></urls></record></Cite><Cite><Author>Uwuigbe</Author><Year>2012</Year><RecNum>94</RecNum><record><rec-number>94</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071947">94</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Uwuigbe, Uwalomwa</author><author>Jafaru, Jimoh</author><author>Ajayi, Anijesushola</author></authors></contributors><titles><title>Dividend policy and firm performance: A study of listed firms in Nigeria</title><secondary-title>Accounting and Management Information Systems</secondary-title></titles><periodical><full-title>Accounting and Management Information Systems</full-title></periodical><pages>442</pages><volume>11</volume><number>3</number><dates><year>2012</year></dates><isbn>1843-8105</isbn><urls></urls></record></Cite></EndNote>(Mehta, 2012; Uwuigbe et al., 2012). 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ADDIN EN.CITE.DATA (Ben Naceur, Goaied, & Belanes, 2006; Fama & French, 2001; Kania & Bacon, 2005). This means firms experiencing rapid growth in their sales are most likely to have higher dividend payout ratios than firms experiencing lower growth rates. However, ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Demirgünescedil</Author><Year>2015</Year><RecNum>63</RecNum><DisplayText>Demirgünescedil (2015)</DisplayText><record><rec-number>63</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070789">63</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Demirgünescedil, Kartal</author></authors></contributors><titles><title>Determinants of Target Dividend Payout Ratio: A Panel ARDL Analysis</title><secondary-title>International Journal of Economics and Financial Issues</secondary-title></titles><periodical><full-title>International Journal of Economics and Financial Issues</full-title></periodical><volume>5</volume><number>2</number><dates><year>2015</year></dates><isbn>2146-4138</isbn><urls></urls></record></Cite></EndNote>Demirgünescedil (2015) found a negative relationship between firm growth rate and the firm’s decision to pay dividends. Based on this finding, the higher the growth rate, the less likely a firm is to pay dividends, as funds are needed to drive the high growth rate. The impact of growth rate on corporate cash holdings is reported to be positive ADDIN EN.CITE <EndNote><Cite><Author>Martínez-Carrascal</Author><Year>2010</Year><RecNum>79</RecNum><DisplayText>(Martínez-Carrascal, 2010; Opler et al., 2001)</DisplayText><record><rec-number>79</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070977">79</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Martínez-Carrascal, Carmen</author></authors></contributors><titles><title>Cash Holdings, Firm Size and Access to External Finance-Evidence for the Euro Area</title></titles><dates><year>2010</year></dates><urls></urls></record></Cite><Cite><Author>Opler</Author><Year>2001</Year><RecNum>327</RecNum><record><rec-number>327</rec-number><foreign-keys><key app="EN" db-id="x2apfv9fhpdxvmepvpdvaw2qf5zvwfdv5zwa" timestamp="1378729297">327</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Opler, Tim</author><author>Pinkowitz, Lee</author><author>Stulz, René</author><author>Williamson, Rohan</author></authors></contributors><titles><title>Corporate cash holdings</title><secondary-title>Journal of Applied Corporate Finance</secondary-title></titles><periodical><full-title>Journal of Applied Corporate Finance</full-title></periodical><pages>55-66</pages><volume>42</volume><number>1</number><dates><year>2001</year></dates><isbn>0304-405X</isbn><urls></urls></record></Cite></EndNote>(Martínez-Carrascal, 2010; Opler et al., 2001) as well as being negative ADDIN EN.CITE <EndNote><Cite><Author>Kariuki</Author><Year>2015</Year><RecNum>73</RecNum><DisplayText>(Kariuki et al., 2015)</DisplayText><record><rec-number>73</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070859">73</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Kariuki, Samuel Nduati</author><author>Namusonge, Gregory S</author><author>Orwa, George O</author></authors></contributors><titles><title>Determinants of corporate cash holdings: evidence from private manufacturing firms in Kenya</title><secondary-title>International Journal of Advanced Research in Management and Social Sciences</secondary-title></titles><periodical><full-title>International Journal of Advanced Research in Management and Social Sciences</full-title></periodical><pages>15-33</pages><volume>4</volume><number>6</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>(Kariuki et al., 2015). Thus, firms with higher growth rates can either maintain large or small amount of cash holdings according to these findings. Considering that Zimbabwean firms need to recapitalize their operations ADDIN EN.CITE <EndNote><Cite><Author>Kwenda</Author><Year>2015</Year><RecNum>100</RecNum><DisplayText>(Kwenda, 2015)</DisplayText><record><rec-number>100</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464077262">100</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Kwenda, F</author></authors></contributors><titles><title>Corporate Financing Strategies employed by listed firms in Zimbabwe firms under the multiple currency era</title><secondary-title>Risk governance and control : financial markets and institutions </secondary-title></titles><periodical><full-title>Risk governance and control : financial markets and institutions</full-title></periodical><pages>161-166</pages><volume>5</volume><number>3</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>(Kwenda, 2015) and are operating in a liquidity constrained environment ADDIN EN.CITE <EndNote><Cite><Author>Kwenda</Author><Year>2015</Year><RecNum>99</RecNum><DisplayText>(Kwenda & Matanda, 2015)</DisplayText><record><rec-number>99</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464077172">99</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Kwenda, F</author><author>Matanda, E</author></authors></contributors><titles><title>Working capital management in a liquidity constrained economy: A case of ZSE-listed firms under the multiple currency era. </title><secondary-title>Public and Municipal Finance</secondary-title></titles><periodical><full-title>Public and Municipal Finance</full-title></periodical><volume>4</volume><number>1</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>(Kwenda & Matanda, 2015), it is hypothesised that the growth rate of these firms may have no influence on their dividend and cash holdings policies. 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ADDIN EN.CITE.DATA (Ali & Yousaf, 2013; Hemmati, Rezaei, & Anaraki, 2013; Mehta, 2012). Profitable firms are likely to pay out more dividends than less profitable firms. A negative relationship exists between dividend policy and ROA ADDIN EN.CITE <EndNote><Cite><Author>Mehta</Author><Year>2012</Year><RecNum>80</RecNum><DisplayText>(Mehta, 2012; Thu, Lê V?nh Tri?n, & Anh, 2013)</DisplayText><record><rec-number>80</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070984">80</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Mehta, Anupam</author></authors></contributors><titles><title>An Empirical Analysis of Determinants of Dividend Policy-Evidence from the UAE Companies</title><secondary-title>Global Review of Accounting and Finance</secondary-title></titles><periodical><full-title>Global Review of Accounting and Finance</full-title></periodical><pages>18-31</pages><volume>3</volume><number>1</number><dates><year>2012</year></dates><urls></urls></record></Cite><Cite><Author>Thu</Author><Year>2013</Year><RecNum>93</RecNum><record><rec-number>93</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071607">93</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Thu, Nguy?n Kim</author><author>Lê V?nh Tri?n, D??ng Thúy Tr?m</author><author>Anh, Hoàng Thành Nh?n</author></authors></contributors><titles><title>Determinants of Dividend Payments of Non-financial Listed Companies in Ho Chi Minh Stock Exchange</title></titles><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>(Mehta, 2012; Thu, Lê V?nh Tri?n, & Anh, 2013) while the relationship is positive between ROE and dividend policy ADDIN EN.CITE <EndNote><Cite><Author>Uwuigbe</Author><Year>2012</Year><RecNum>94</RecNum><DisplayText>(Uwuigbe et al., 2012)</DisplayText><record><rec-number>94</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071947">94</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Uwuigbe, Uwalomwa</author><author>Jafaru, Jimoh</author><author>Ajayi, Anijesushola</author></authors></contributors><titles><title>Dividend policy and firm performance: A study of listed firms in Nigeria</title><secondary-title>Accounting and Management Information Systems</secondary-title></titles><periodical><full-title>Accounting and Management Information Systems</full-title></periodical><pages>442</pages><volume>11</volume><number>3</number><dates><year>2012</year></dates><isbn>1843-8105</isbn><urls></urls></record></Cite></EndNote>(Uwuigbe et al., 2012). This means firms with higher ROA maintain lower dividend payout ratios while firms with higher ROE maintain higher dividend payout ratios. ROE and EBIT respectively positively and negatively influence cash holdings ADDIN EN.CITE <EndNote><Cite><Author>Ali</Author><Year>2013</Year><RecNum>54</RecNum><DisplayText>(Ali & Yousaf, 2013; Hemmati et al., 2013)</DisplayText><record><rec-number>54</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070707">54</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Ali, Abbas</author><author>Yousaf, Samran</author></authors></contributors><titles><title>Determinants of Cash holding in German Market</title><secondary-title>IOSR Journal of Business and Management (IOSR-JBM)</secondary-title></titles><periodical><full-title>IOSR Journal of Business and Management (IOSR-JBM)</full-title></periodical><pages>28-34</pages><volume>12</volume><number>6</number><dates><year>2013</year></dates><urls></urls></record></Cite><Cite><Author>Hemmati</Author><Year>2013</Year><RecNum>69</RecNum><record><rec-number>69</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070829">69</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Hemmati, Hassan</author><author>Rezaei, Farzin</author><author>Anaraki, Negar Baradaran</author></authors></contributors><titles><title>Investigating the Financial Determinants of Corporate Cash Holdings in Tehran Stock Exchange</title><secondary-title>Interdisciplinary Journal of Contemporary Research In Business</secondary-title></titles><periodical><full-title>Interdisciplinary Journal of Contemporary Research In Business</full-title></periodical><pages>92</pages><volume>5</volume><number>6</number><dates><year>2013</year></dates><isbn>2073-7122</isbn><urls></urls></record></Cite></EndNote>(Ali & Yousaf, 2013; Hemmati et al., 2013). Thus firms with higher ROE maintain higher cash ratios while firms with higher EBIT maintain lower cash ratios. In this study, it is been hypothesized that profitability positively influences both dividend and cash holdings policies. Financial Leverage: Financial leverage is the extent to which a firm is financed by debt and is measured by dividing total debt with total assets ADDIN EN.CITE <EndNote><Cite><Author>Thu</Author><Year>2013</Year><RecNum>93</RecNum><DisplayText>(Thu et al., 2013)</DisplayText><record><rec-number>93</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071607">93</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Thu, Nguy?n Kim</author><author>Lê V?nh Tri?n, D??ng Thúy Tr?m</author><author>Anh, Hoàng Thành Nh?n</author></authors></contributors><titles><title>Determinants of Dividend Payments of Non-financial Listed Companies in Ho Chi Minh Stock Exchange</title></titles><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>(Thu et al., 2013). Higher leverage may result in a lower payout ratio as lenders put restrictive covenants in debt contracts. ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Al-Malkawi</Author><Year>2010</Year><RecNum>56</RecNum><DisplayText>Al-Malkawi, Rafferty, and Pillai (2010)</DisplayText><record><rec-number>56</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070738">56</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Al-Malkawi, Husam-Aldin Nizar</author><author>Rafferty, Michael</author><author>Pillai, Rekha</author></authors></contributors><titles><title>Dividend policy: A review of theories and empirical evidence</title><secondary-title>International Bulletin of Business Administration</secondary-title></titles><periodical><full-title>International Bulletin of Business Administration</full-title></periodical><pages>171-200</pages><volume>9</volume><number>9</number><dates><year>2010</year></dates><urls></urls></record></Cite></EndNote>Al-Malkawi, Rafferty, and Pillai (2010) and ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Gupta</Author><Year>2010</Year><RecNum>101</RecNum><DisplayText>Gupta and Banga (2010)</DisplayText><record><rec-number>101</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464077927">101</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Gupta, Amitabh</author><author>Banga, Charu</author></authors></contributors><titles><title>The determinants of corporate dividend policy</title><secondary-title>Decision</secondary-title></titles><periodical><full-title>Decision</full-title></periodical><pages>63</pages><volume>37</volume><number>2</number><dates><year>2010</year></dates><isbn>0304-0941</isbn><urls></urls></record></Cite></EndNote>Gupta and Banga (2010) found a negative relationship between dividend policy and financial leverage, meaning the higher the financial leverage ratio the lower the dividend payout ratio. However, ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Jensen</Author><Year>1986</Year><RecNum>71</RecNum><DisplayText>Jensen (1986)</DisplayText><record><rec-number>71</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070846">71</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Jensen, Michael C</author></authors></contributors><titles><title>Agency cost of free cash flow, corporate finance, and takeovers</title><secondary-title>Corporate Finance, and Takeovers. American Economic Review</secondary-title></titles><periodical><full-title>Corporate Finance, and Takeovers. American Economic Review</full-title></periodical><volume>76</volume><number>2</number><dates><year>1986</year></dates><urls></urls></record></Cite></EndNote>Jensen (1986) found that firms with higher financial leverage ratios maintain high dividend payout ratios than firms with lower financial leverage ratios. In analysing the relationship between financial leverage and cash holdings, ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Al-Malkawi</Author><Year>2010</Year><RecNum>56</RecNum><DisplayText>Al-Malkawi et al. (2010)</DisplayText><record><rec-number>56</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070738">56</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Al-Malkawi, Husam-Aldin Nizar</author><author>Rafferty, Michael</author><author>Pillai, Rekha</author></authors></contributors><titles><title>Dividend policy: A review of theories and empirical evidence</title><secondary-title>International Bulletin of Business Administration</secondary-title></titles><periodical><full-title>International Bulletin of Business Administration</full-title></periodical><pages>171-200</pages><volume>9</volume><number>9</number><dates><year>2010</year></dates><urls></urls></record></Cite></EndNote>Al-Malkawi et al. (2010) and ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Anjum</Author><Year>2013</Year><RecNum>59</RecNum><DisplayText>Anjum and Malik (2013)</DisplayText><record><rec-number>59</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070761">59</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Anjum, Sara</author><author>Malik, Q</author></authors></contributors><titles><title>Determinants of corporate liquidity: An analysis of cash holdings</title><secondary-title>Journal of Business and Management</secondary-title></titles><periodical><full-title>Journal of Business and Management</full-title></periodical><pages>94-100</pages><volume>7</volume><number>2</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>Anjum and Malik (2013) found that firms with lower financial leverage ratios keep large cash holdings than firms with higher leverage ratio. ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Islam</Author><Year>2012</Year><RecNum>70</RecNum><DisplayText>Islam (2012)</DisplayText><record><rec-number>70</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070837">70</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Islam, Sohani</author></authors></contributors><titles><title>Manufacturing Firms' Cash Holding Determinants: Evidence from Bangladesh</title><secondary-title>International Journal of Business and Management</secondary-title></titles><periodical><full-title>International Journal of Business and Management</full-title></periodical><pages>172</pages><volume>7</volume><number>6</number><dates><year>2012</year></dates><isbn>1833-3850</isbn><urls></urls></record></Cite></EndNote>Islam (2012) and ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Kariuki</Author><Year>2015</Year><RecNum>73</RecNum><DisplayText>Kariuki et al. (2015)</DisplayText><record><rec-number>73</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070859">73</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Kariuki, Samuel Nduati</author><author>Namusonge, Gregory S</author><author>Orwa, George O</author></authors></contributors><titles><title>Determinants of corporate cash holdings: evidence from private manufacturing firms in Kenya</title><secondary-title>International Journal of Advanced Research in Management and Social Sciences</secondary-title></titles><periodical><full-title>International Journal of Advanced Research in Management and Social Sciences</full-title></periodical><pages>15-33</pages><volume>4</volume><number>6</number><dates><year>2015</year></dates><urls></urls></record></Cite></EndNote>Kariuki et al. (2015) analysed the financial leverage and cash holdings relationship and found that firms with higher leverage ratios maintain lower cash ratios. The direction of influence on financial leverage on dividend and cash holding policies is difficult to hypothesize given the conflicting findings in existing studies. Liquidity: Liquidity or working capital can be defined as total current assets excluding cash and cash equivalents divided by total current liabilities ADDIN EN.CITE <EndNote><Cite><Author>Ogundipe</Author><Year>2012</Year><RecNum>84</RecNum><DisplayText>(Ogundipe, Ogundipe, & Ajao, 2012)</DisplayText><record><rec-number>84</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071010">84</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Ogundipe, Lawrencia Olatunde</author><author>Ogundipe, Sunday Emmanuel</author><author>Ajao, Samuel Kehinde</author></authors></contributors><titles><title>Cash holding and firm characteristics: Evidence from Nigerian emerging market</title><secondary-title>Journal of Business Economics and Finance</secondary-title></titles><periodical><full-title>Journal of Business Economics and Finance</full-title></periodical><pages>45-58</pages><volume>1</volume><number>2</number><dates><year>2012</year></dates><isbn>2146-7943</isbn><urls></urls></record></Cite></EndNote>(Ogundipe, Ogundipe, & Ajao, 2012). ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Badu</Author><Year>2013</Year><RecNum>60</RecNum><DisplayText>Badu (2013)</DisplayText><record><rec-number>60</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070768">60</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Badu, Ebenezer Agyemang</author></authors></contributors><titles><title>Determinants of Dividend Payout Policy of listed Financial Institutions in Ghana</title><secondary-title>Research Journal of Finance and Accounting</secondary-title></titles><periodical><full-title>Research Journal of Finance and Accounting</full-title></periodical><pages>184-190</pages><volume>4</volume><number>7</number><dates><year>2013</year></dates><urls></urls></record></Cite></EndNote>Badu (2013) and ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Gupta</Author><Year>2010</Year><RecNum>101</RecNum><DisplayText>Gupta and Banga (2010)</DisplayText><record><rec-number>101</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464077927">101</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Gupta, Amitabh</author><author>Banga, Charu</author></authors></contributors><titles><title>The determinants of corporate dividend policy</title><secondary-title>Decision</secondary-title></titles><periodical><full-title>Decision</full-title></periodical><pages>63</pages><volume>37</volume><number>2</number><dates><year>2010</year></dates><isbn>0304-0941</isbn><urls></urls></record></Cite></EndNote>Gupta and Banga (2010) reported that firms with higher liquidity ratios pay higher dividends than firms with lower liquidity ratios. A negative relationship is also confirmed between liquidity ratio and cash ratio, where firms with higher liquidity ratios are likely to have lower cash holdings than firms with lower liquidity ratios ADDIN EN.CITE <EndNote><Cite><Author>Ali</Author><Year>2013</Year><RecNum>54</RecNum><DisplayText>(Ali & Yousaf, 2013; Islam, 2012)</DisplayText><record><rec-number>54</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070707">54</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Ali, Abbas</author><author>Yousaf, Samran</author></authors></contributors><titles><title>Determinants of Cash holding in German Market</title><secondary-title>IOSR Journal of Business and Management (IOSR-JBM)</secondary-title></titles><periodical><full-title>IOSR Journal of Business and Management (IOSR-JBM)</full-title></periodical><pages>28-34</pages><volume>12</volume><number>6</number><dates><year>2013</year></dates><urls></urls></record></Cite><Cite><Author>Islam</Author><Year>2012</Year><RecNum>70</RecNum><record><rec-number>70</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070837">70</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Islam, Sohani</author></authors></contributors><titles><title>Manufacturing Firms' Cash Holding Determinants: Evidence from Bangladesh</title><secondary-title>International Journal of Business and Management</secondary-title></titles><periodical><full-title>International Journal of Business and Management</full-title></periodical><pages>172</pages><volume>7</volume><number>6</number><dates><year>2012</year></dates><isbn>1833-3850</isbn><urls></urls></record></Cite></EndNote>(Ali & Yousaf, 2013; Islam, 2012). However, ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Ogundipe</Author><Year>2012</Year><RecNum>84</RecNum><DisplayText>Ogundipe et al. (2012)</DisplayText><record><rec-number>84</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071010">84</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Ogundipe, Lawrencia Olatunde</author><author>Ogundipe, Sunday Emmanuel</author><author>Ajao, Samuel Kehinde</author></authors></contributors><titles><title>Cash holding and firm characteristics: Evidence from Nigerian emerging market</title><secondary-title>Journal of Business Economics and Finance</secondary-title></titles><periodical><full-title>Journal of Business Economics and Finance</full-title></periodical><pages>45-58</pages><volume>1</volume><number>2</number><dates><year>2012</year></dates><isbn>2146-7943</isbn><urls></urls></record></Cite></EndNote>Ogundipe et al. (2012) found that low liquidity companies maintain lower cash ratios than high liquidity companies. Accordingly, this study hypothesizes that liquidity significantly influences both corporate dividend policy and corporate cash holdings policy in a transitional economy.Business Risk: Business risk can be defined as variability in cash flows or profitability ADDIN EN.CITE <EndNote><Cite><Author>Mehta</Author><Year>2012</Year><RecNum>80</RecNum><DisplayText>(Mehta, 2012; Sher, 2014)</DisplayText><record><rec-number>80</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070984">80</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Mehta, Anupam</author></authors></contributors><titles><title>An Empirical Analysis of Determinants of Dividend Policy-Evidence from the UAE Companies</title><secondary-title>Global Review of Accounting and Finance</secondary-title></titles><periodical><full-title>Global Review of Accounting and Finance</full-title></periodical><pages>18-31</pages><volume>3</volume><number>1</number><dates><year>2012</year></dates><urls></urls></record></Cite><Cite><Author>Sher</Author><Year>2014</Year><RecNum>86</RecNum><record><rec-number>86</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071024">86</key></foreign-keys><ref-type name="Book">6</ref-type><contributors><authors><author>Sher, Galen</author></authors></contributors><titles><title>Cashing in for Growth: Corporate Cash Holdings as an Opportunity for Investment in Japan</title></titles><number>14-221</number><dates><year>2014</year></dates><publisher>International Monetary Fund</publisher><isbn>1498376711</isbn><urls></urls></record></Cite></EndNote>(Mehta, 2012; Sher, 2014). Firms experiencing high business risks pay lower dividends while maintaining high levels of cash holdings ADDIN EN.CITE <EndNote><Cite><Author>Opler</Author><Year>2001</Year><RecNum>327</RecNum><DisplayText>(Opler et al., 2001; Sher, 2014)</DisplayText><record><rec-number>327</rec-number><foreign-keys><key app="EN" db-id="x2apfv9fhpdxvmepvpdvaw2qf5zvwfdv5zwa" timestamp="1378729297">327</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Opler, Tim</author><author>Pinkowitz, Lee</author><author>Stulz, René</author><author>Williamson, Rohan</author></authors></contributors><titles><title>Corporate cash holdings</title><secondary-title>Journal of Applied Corporate Finance</secondary-title></titles><periodical><full-title>Journal of Applied Corporate Finance</full-title></periodical><pages>55-66</pages><volume>42</volume><number>1</number><dates><year>2001</year></dates><isbn>0304-405X</isbn><urls></urls></record></Cite><Cite><Author>Sher</Author><Year>2014</Year><RecNum>86</RecNum><record><rec-number>86</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071024">86</key></foreign-keys><ref-type name="Book">6</ref-type><contributors><authors><author>Sher, Galen</author></authors></contributors><titles><title>Cashing in for Growth: Corporate Cash Holdings as an Opportunity for Investment in Japan</title></titles><number>14-221</number><dates><year>2014</year></dates><publisher>International Monetary Fund</publisher><isbn>1498376711</isbn><urls></urls></record></Cite></EndNote>(Opler et al., 2001; Sher, 2014). In this paper, it is hypothesised that business risk negatively influences cash holdings policy and positively influences dividend policy. The above discussion confirmed that corporate dividend policy and corporate cash holdings are influenced by common factors. Furthermore, some studies established that dividend policy and cash holdings policy impact on each other ADDIN EN.CITE <EndNote><Cite><Author>Gao</Author><Year>2013</Year><RecNum>65</RecNum><DisplayText>(Gao, Harford, & Li, 2013; Tsuji, 2014)</DisplayText><record><rec-number>65</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070799">65</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Gao, Huasheng</author><author>Harford, Jarrad</author><author>Li, Kai</author></authors></contributors><titles><title>Determinants of corporate cash policy: Insights from private firms</title><secondary-title>Journal of Financial Economics</secondary-title></titles><periodical><full-title>Journal of Financial Economics</full-title></periodical><pages>623-639</pages><volume>109</volume><number>3</number><dates><year>2013</year></dates><isbn>0304-405X</isbn><urls></urls></record></Cite><Cite><Author>Tsuji</Author><Year>2014</Year><RecNum>88</RecNum><record><rec-number>88</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071037">88</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Tsuji, Chikashi</author></authors></contributors><titles><title>Cash Holdings, Dividend Policy, and Stock Return of the Automobile Related Firms at the Tokyo Stock Exchange: Before and After the US Lehman Shock</title><secondary-title>Journal of Social Science Studies</secondary-title></titles><periodical><full-title>Journal of Social Science Studies</full-title></periodical><pages>32</pages><volume>1</volume><number>2</number><dates><year>2014</year></dates><isbn>2329-9150</isbn><urls></urls></record></Cite></EndNote>(Gao, Harford, & Li, 2013; Tsuji, 2014). This confirms that there is a simultaneous relationship between dividend policy and cash holdings policy. A study by ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Al‐Najjar</Author><Year>2011</Year><RecNum>58</RecNum><DisplayText>Al‐Najjar and Belghitar (2011)</DisplayText><record><rec-number>58</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070754">58</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Al‐Najjar, Basil</author><author>Belghitar, Yacine</author></authors></contributors><titles><title>Corporate cash holdings and dividend payments: Evidence from simultaneous analysis</title><secondary-title>Managerial and Decision Economics</secondary-title></titles><periodical><full-title>Managerial and Decision Economics</full-title></periodical><pages>231-241</pages><volume>32</volume><number>4</number><dates><year>2011</year></dates><isbn>1099-1468</isbn><urls></urls></record></Cite></EndNote>Al‐Najjar and Belghitar (2011) confirmed this simultaneous relationship and is the anchor of this study. The next section will discuss the data sources and analysis methods. Sample and data sourcesThis study aims to examine the dividend and cash holding policies employed by Zimbabwean listed companies and examine whether simultaneity between these two policies holds. The empirical study is based on a sample of non-financial firms listed on the Zimbabwe Stock Exchange. Sample firms’ data were collected from the financial statements for the accounting period 2009 to 2014 from the McGregor BFA Library. Consistent with some previous studies firms in the banking and financial services real estate sectors were excluded from the sample because they are highly leveraged and the nature of their cash holdings is different from the context of this study.Descriptive StatisticsThe means values are used to measure central tendency for the variables while minimum value, maximum value and standard deviation measure variability in study variables. The average total annual dividends to profit after tax (DY) is 0.07 with a volatility of 0.17. The average cash and cash equivalents to total assets (CASH) is 0.06 with a minimum of zero and a maximum value of 0.29. The average leverage (as measured by total debt to total assets) is 0.53 which means firms in this sample finance a little over half of their assets with debt. The average ROE is 6% which means that sample firms are generating 6 cents per every dollar invested by the shareholders. Sample firms are experiencing high growth in sales as shown by the average of 46%. The average non-cash liquid current assets to total assets (WCR) is 1.46 with a volatility of 0.89, a minimum value of 0.18 and a maximum value of 3.68. MethodologyThe study follows the footsteps of ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Al‐Najjar</Author><Year>2011</Year><RecNum>58</RecNum><DisplayText>Al‐Najjar and Belghitar (2011)</DisplayText><record><rec-number>58</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070754">58</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Al‐Najjar, Basil</author><author>Belghitar, Yacine</author></authors></contributors><titles><title>Corporate cash holdings and dividend payments: Evidence from simultaneous analysis</title><secondary-title>Managerial and Decision Economics</secondary-title></titles><periodical><full-title>Managerial and Decision Economics</full-title></periodical><pages>231-241</pages><volume>32</volume><number>4</number><dates><year>2011</year></dates><isbn>1099-1468</isbn><urls></urls></record></Cite></EndNote>Al‐Najjar and Belghitar (2011) in analyzing the determinants of cash holdings and dividends payments. The decision to pay dividends depends on cash held by the company and similarly, the decision to hold cash depends on the firm’s dividend policy.Table SEQ Table \* ARABIC 2: Descriptive Statistics VariablesVariable construction MeanStandard DeviationMinimum Maximum DY Total Annual Dividends / Profit After Tax0.070.1700.8CASHCash And Cash Equivalents / Total Assets0.060.0700.29SIZEnatural logarithm of total assets4.590.803.016.94LEVTotal debt / total assets0.530.220.080.99GRAnnual growth rate in sales0.460.66-0.733.64ROEProfit after tax / Total equity0.060.18-0.171.01WCRTotal Current Assets – Cash & Cash Equivalents / Total Current Liabilities1.460.890.183.68RISK Variability in Return on Equity0.370.610.0013.62 Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.Correlation MatrixIn this segment, the findings on the associations among the study variables at 5% significance level are given. The following Table 6.2 summarises the correlation results of the variables. Table SEQ Table \* ARABIC 3: Correlation MatrixDYCASH SIZE LEVGRROEWCRRISKDY1.0000CASH 0.86991.0000SIZE0.78600.85001.0000LEV0.70840.81900.74371.0000GR-0.1991-0.1994-0.2541-0.19731.0000ROE0.78880.78850.74880.6580-0.20461.0000WCR0.77730.83610.79780.7607-0.21420.74031.0000RISK-0.6896-0.7107-0.6146-0.69430.0474-0.4773-0.68991.000Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library. Table 3 presents the correlation values between dividend payout ratio (DY), cash ratio (CASH) and the explanatory variables. There is a strong positive correlation between dividend payout ratio and cash ratio suggesting that when firms increase their dividend payout ratios when their cash ratios increase. Pairwise correlation among independent variables; firm size (SIZE), financial leverage (LEV), firm growth (GR), return on equity (ROE), working capital ratio (WCR) and business risk (RISK) do not exhibit excessively high correlation; therefore the regression results will not have multi-collinearity problems. Single Equation ModelsThe study first performed regression to determine explanatory variables for both dividend policy and cash holdings policy, devoid of existence of simultaneity. The following models represent the single equation models:DYit=α0+β1CASHit +β'Xit+εit …………………………….……Equation SEQ Equation \* ARABIC 1CASHit=α0+β1DYit +β2WCRit+β'Xit+εit ………………..Equation SEQ Equation \* ARABIC 2Where DY is dividend payout ratio, CASH is the cash ratio, WCR is working capital ratio, Xit is a column vector of specific independent variables for firm ‘i’ in time period ‘t’, α is intercept for the models, β is slope for research the research variables and error term εit for firm ‘i’ in time period ‘t’. Reduced Equation ModelsDYit=π0+π1LEVit+ π2ROEit+ π 3GRit+π4SIZEit+π5RISKit+εit ……. Equation SEQ Equation \* ARABIC 3CASHit=π0+π11LEVit+ π12ROEit+ π 13GRit+π14SIZEit+π15RISKit+εit…….….. Equation SEQ Equation \* ARABIC 4Simultaneous Equation ModelsThe following models represent the simultaneous equations for the study:DYit=β0+β1CASHit +β2LEVit+β3ROEit + β4GRit+β5SIZEit+β6RISKit+εit…………......... Equation SEQ Equation \* ARABIC 5CASHit=β7+β8DYit +β9LEVit+β10ROEit + β11GRit+β12SIZEit+β13RISKit+β14WCRit+εit…………... Equation SEQ Equation \* ARABIC 6Instrument variable estimation was employed to determine the simultaneity between dividend policy and cash holdings policy.The above equation defines the determinants of corporate dividend policy after taking into consideration the simultaneity between dividend policy and cash holdings policy. The reduced equation model is based on the existence of a simultaneous relationship that exists between corporate dividend policy and corporate cash holdings. ResultsSingle Equations ResultsThe determinants of dividend payments from regression of 95 percent confidence level are summarised in Table 4. Model 1 presents regression results where unobserved effects are assumed to be constant, Model 2 controls for unobserved effects, Model 3 includes time effects and Model 4 include both time and industry effects. In Model 1 where unobserved effects are assumed to be constant, dividend policy is influenced by cash holdings, firm size, financial leverage, return on equity, working capital and business risk. In Model 2 where unobserved effects are controlled; cash holdings, firm size, financial leverage, working capital ratio and business risk significantly influence dividend policy. Table SEQ Table \* ARABIC 4: Dividend Policy DeterminantsVariableModelModelModelModel1234CASH 0.332**0.180**0.214***0.141**(0.014)(0.033)(0.004)(0.023)SIZE0.02**0.017***0.0210.060(0.026)(0.004)(0.129)(0.449)LEV0.08***0.087***0.034**0.112**(0.007)(0.003)(0.031)(0.044)GR-0.004-0.008-0.008-0.018(0.505)(0.457)(0.646)(0.618)ROE0.136**0.3150.1940.162(0.032)(0.106)(0.351)(0.289)WCR0.034***0.0030.012**0.052***(0.000)(0.001)(0.014)(0.002)RISK-0.038**-0.100**0.021***-0.029***(0.012)(0.024)(0.028)(0.022)CONSTANT-0.135***-0.130***-0.012**-0.013(0.001)(0.002)(0.043)(0.124)R20.810.810.780.74t statistics in parenthesis *, ** and *** significant at 10%, 5% and 1% respectively Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.In Model 4 where time and industry effects are taken into consideration, cash holdings, financial leverage, working capital and business risk significantly influence the dividend policy. Consistent with ADDIN EN.CITE <EndNote><Cite AuthorYear="1"><Author>Mehta</Author><Year>2012</Year><RecNum>80</RecNum><DisplayText>Mehta (2012)</DisplayText><record><rec-number>80</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070984">80</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Mehta, Anupam</author></authors></contributors><titles><title>An Empirical Analysis of Determinants of Dividend Policy-Evidence from the UAE Companies</title><secondary-title>Global Review of Accounting and Finance</secondary-title></titles><periodical><full-title>Global Review of Accounting and Finance</full-title></periodical><pages>18-31</pages><volume>3</volume><number>1</number><dates><year>2012</year></dates><urls></urls></record></Cite></EndNote>Mehta (2012), this study also found that business risk has a negative relationship with dividend payout ratio while the rest of the significant variables have a positive relationship with dividend payout ratio. The negative relationship between business risk and dividend policy suggests that when the firms are experiencing high business risk, they maintain lower dividend payout ratio. Firms keep a higher dividend payout ratio if their cash ratio, firm size, financial leverage ratio and working capital ratio are high consistent with previous studies ADDIN EN.CITE <EndNote><Cite><Author>Uwuigbe</Author><Year>2012</Year><RecNum>94</RecNum><DisplayText>(Koshio, 2005; Uwuigbe et al., 2012)</DisplayText><record><rec-number>94</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464071947">94</key></foreign-keys><ref-type name="Journal Article">17</ref-type><contributors><authors><author>Uwuigbe, Uwalomwa</author><author>Jafaru, Jimoh</author><author>Ajayi, Anijesushola</author></authors></contributors><titles><title>Dividend policy and firm performance: A study of listed firms in Nigeria</title><secondary-title>Accounting and Management Information Systems</secondary-title></titles><periodical><full-title>Accounting and Management Information Systems</full-title></periodical><pages>442</pages><volume>11</volume><number>3</number><dates><year>2012</year></dates><isbn>1843-8105</isbn><urls></urls></record></Cite><Cite><Author>Koshio</Author><Year>2005</Year><RecNum>74</RecNum><record><rec-number>74</rec-number><foreign-keys><key app="EN" db-id="sta2stwz6f5ttmeas2cp229ated5fav9fe52" timestamp="1464070865">74</key></foreign-keys><ref-type name="Thesis">32</ref-type><contributors><authors><author>Koshio, Senichiro</author></authors></contributors><titles><title>Nível de caixa de empresas n?o financeiras no Brasil: determinantes e rela??o com o endividamento</title></titles><dates><year>2005</year></dates><urls></urls></record></Cite></EndNote>(Koshio, 2005; Uwuigbe et al., 2012). Table SEQ Table \* ARABIC 5: Cash Holdings Policy Determinants VariableModelModelModelModel1234DY 0.157***0.145***0.114***0.194**(0.000)(0.000)(0.002)(0.014)SIZE0.0060.0130.0470.013(0.428)(0.221)(0.121)(0.192)LEV0.097***0.0920***0.160**0.091***(0.000)(0.000)(0.036)(0.001)GR0.0010.0140.023*0.025**(0.746)(0.980)(0.051)(0.048)ROE-0.006-0.011-0.024-0.009(0.843)(0.733)(0.635)(0.827)WCR0.030***0.018***0.014***0.008**(0.000)(0.010)(0.006)(0.035)RISK0.017**0.012**0.037**0.013**(0.030)(0.042)(0.019)(0.020)CONSTANT-0.08***-0.074***-0.116-0.034**(0.010)(0.09)(0.113)(0.019)R20.780.790.870.87t statistics in parenthesis *, ** and *** significant at 10%, 5% and 1% respectively Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.The regression results for determinants of cash holdings at 5% significance level are given in Table 5. When assuming that unobserved effects are constant or when unobserved effects are controlled cash holdings policy in a Zimbabwe’s multiple currency is influenced by dividend payments, financial leverage, working capital and business risk. However, when taking industry and time effects into consideration cash holdings policy is influenced by dividend payments, financial leverage, firm’s growth rate, working capital and business risk. Firms keep higher levels of cash holdings in the face of higher dividend payments, financial leverage, working capital and business risk. The results corroborate what is reported in existing empirical evidence. Firms have to increase their cash holdings in the face of increasing dividend payments, financial leverage, working capital, sales and business risk but reduce the cash holdings if these explanatory variables are also decreasing PEVuZE5vdGU+PENpdGU+PEF1dGhvcj5PZ3VuZGlwZTwvQXV0aG9yPjxZZWFyPjIwMTI8L1llYXI+
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ADDIN EN.CITE.DATA (Ku, Lee, Chen, & Chang, 2013; Ogundipe et al., 2012; Sher, 2014).Reduced Form ResultsThe above single equation results are biased and inconsistent as a result of presence of endogeneity bias. The reduced form equation results in this segment are given to counter the endogeneity bias. The reduced form equation results for dividend payments are presented first in Table 6. The reduced form results for determinants of dividend payments are consistent with single equation results. Firm size, financial leverage, return on equity, working capital ratio and business have been reconfirmed as determinants corporate dividend policy in Zimbabwe’s multiple currency economy. Thus, the absence of endogeneity bias has not changed the results under the reduced form. The reduced form equation results for cash holdings determinants are summarised in Table 7.Table SEQ Table \* ARABIC 6: Dividend Policy Reduced Form Results VariableModelModelModelModel1234SIZE0.234**0.089**0.114*0.063(0.013)(0.036)(0.089)(0.332)LEV0.112**0.129**0.096***0.238***(0.024)(0.019)(0.008)(0.006)GR-0.012-0.017-0.164-0.092(0.168)(0.879)(0.657)(0.513)ROE0.231**0.2980.0780.281(0.014)(0.123)(0.135)(0.182)WCR0.068**0.102**0.068***0.087***(0.012)(0.031)(0.008)(0.005)RISK-0.123***-0.214***0.097**-0.055***(0.009)(0.006)(0.015)(0.004)CONSTANT-0.219**-0.290***-0.152**-0.071(0.023)(0.006)(0.041)(0.234)R20.720.730.680.66t statistics in parenthesis *, ** and *** significant at 10%, 5% and 1% respectively Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.The results in Table 7 above confirm that cash holdings under reduced form equation are influenced by financial leverage, working capital ratio and business risk. The same three factors have also been confirmed as determinants of cash holdings under the single equation results. However, growth rate which has been confirmed as an explanatory variable under single equation results, is an insignificant factor under reduced form equation. Thus, elimination of endogeneity bias leads to exclusion of firm growth rate as a determinant of cash holdings in Zimbabwe’s multiple currency economy. Table SEQ Table \* ARABIC 7: Cash Holdings Policy Reduced Form Results VariableModelModelModelModel1234SIZE0.0190.0980.1040.069(0.342)(0.216)(0.214)(0.248)LEV0.143***0.105***0.098**0.127**(0.002)(0.004)(0.025)(0.011)GR0.0210.0270.0620.032*(0.542)(0.618)(0.121)(0.078)ROE-0.124-0.042-0.052-0.025(0.612)(0.561)(0.674)(0.921)WCR0.048***0.018**0.024**0.053**(0.001)(0.017)(0.016)(0.014)RISK0.126***0.095**0.062***0.013**(0.004)(0.013)(0.010)(0.012)CONSTANT-0.123-0.105-0.602-0.114*(0.261)(0.116)(0.219)(0.096)R20.640.680.720.76t statistics in parenthesis *, ** and *** significant at 10%, 5% and 1% respectively Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.Simultaneous equation results obtained from instrument variable estimation presented in Table 8 confirm that dividend payout ratio and cash ratio influence each other significantly. This reciprocal significant relationship between cash ratio and dividend payout ratio is collaborated by previous studies (Opler et al., 1999; Gao et al., 2013; Tsuji, 2014). The regression results also show that there are common explanatory variables between dividend payout ratio and cash ratio. The common significant explanatory variables for both dividend payout ratio and cash ratio are financial leverage (LEV), working capital ratio (WCR) and business risk (RISK). It can be concluded that there is a simultaneous relationship between corporate dividend policy and corporate cash holdings policy for listed non-financial firms operating in Zimbabwe’s multiple currency system. This study confirms the findings of Al-Najjar and Belghitar (2011) who first noted the existence of simultaneous relationship between corporate dividend policy and corporate cash holdings. Simultaneous Equations ResultsFindings from instrument variable estimation for simultaneous equations models are summarised in Table 7.Table SEQ Table \* ARABIC 7: Simultaneity Test ResultsVariableDependent variable – dividend Dependent variable – cash CASH 0.312**-(0.012)-DY -0.081**-(0.006) SIZE-0.057**0.018(0.046)(0.163)LEV0.042**0.098***(0.032)(0.000) GR0.0510.01(0.640)(0.935)ROE0.6400.036(0.015)(0.589)WCR0.026**0.020***(0.024)(0.006) RISK-0.012**0.011***(0.017)(0.008) CONSTANT -0.288*-0.114**(0.069)(0.038)R20.750.86t statistics in parenthesis *, ** and *** significant at 10%, 5% and 1% respectively Source: Own calculations using an unbalanced panel over the period 2009 to 2014. Data obtained from the McGregor BFA library.ConclusionThe aim of the study was to test whether simultaneity between cash holding and dividend policies hold in Zimbabwe’s multiple currency system. Zimbabwe is on a recovery from decade political social and economic crises. Using a sample of 58 ZSE-listed non-financial firms for the period 2009-2014 the study found that dividend policy and cash holdings influence each other and are also influenced by common factors, financial leverage, working capital ratio and business risk. The study concluded that simultaneity holds between cash holdings and dividend policy. It is therefore importance for finance managers to pay attention to the drivers of these two important decisions since they significantly influence each other. References ADDIN EN.REFLIST Al-Amri, K., Al-Busaidi, M., & Akguc, S. (2015). Conservatism and corporate cash holdings: a risk prospective. Investment Management and Financial Innovations, 12(1), 101-113. Al-Malkawi, H.-A. N., Rafferty, M., & Pillai, R. (2010). Dividend policy: A review of theories and empirical evidence. International Bulletin of Business Administration, 9(9), 171-200. Al‐Najjar, B., & Belghitar, Y. (2011). 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