Academics in management economics fail dismally in their study of examining the

determinants of the dividend pay-out ratio of Sub-Saharan Africa banks using the
irrelevant panel GMM approach

As Ng’ang’a, (2014) posits that many academics have been interested in researching
corporate dividend policy, but the issue has not yet been resolved. The researchers of the
study took upon it themselves to solve the four decade long predicament and unfortunately
did not provide solutions to this long standing unresolved area of research. Out of the 46 Sub-
Saharan African (SSA) countries they consider their study of 30 countries enough to be
generalizable and to be celebrated as the “Aha Moment” in solving the decades old corporate
dividend policy quandary in academia. The reasoning being that, the economies of these Sub-
Saharan countries are not the same, each one is unique and so is their banking sector. Just to
mention two of the countries which are the richest nations in the region, South Africa and
Nigeria, have radically distinct economic systems. Nigeria's economy has been unstable in
recent years as a result of the country's reliance on oil, which is subject to unpredictable price
swings and is a popular target for theft.

The banking markets are oligopolistic in nature because all the countries have comparable
economic and financial characteristics. Which is contrary to what Akande and Kwenda
(2017) who concluded that the bank industry is monopolistic and competitive as the amount
of bank capital affects the level of competitiveness. There are a lot of disparities in the
economies in the SSA, therefore sample size does not provide for the generalisation of their
study as they justify themselves neither does it provide for the validity of their study.
Therefore one can conclude that this study was mostly based on the researchers’ preconceived
ideas instead of data that they got from their so called study.

Instead of using the GMM Approach which is a highly generic big sample estimator. GMM is
far more of an economics trick than a suitable endogeneity solution. This study should have
used an estimating method, such as auto-regressive distributed lags (ARDL), that can
simultaneously capture short-run and long-run estimations of these variables studied by the
researchers and examining co-integrating correlations between variables. In conclusion their
study lacks validity in the sense that it did not put into consideration macro-economic
variables which are external determinants, but only considered internal variables. Bank-
specific variables are just internal determinants of dividend pay-out ratio, as banks don’t exist
in a vacuum they exist in a financial ecosystem which includes micro and macro-economics.

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