Investigating the impact of four proxies of agency costs on dividend policy in the context of listed companies of small island economies: a case study of Mauritius

The study investigates the impacts of four agency costs on the dividend policy of firms listed on the Stock Exchange of Mauritius Ltd. (SEM). It uses least squares regression to test and examine the impact of four Agency Cost Variables (ACVs), namely ownership dispersion, insider ownership, Free Cash Flow (FCF) and leverage ratio, on the Dividend Payout Decisions (DPOD) in the Mauritian-listed companies. Dividend payout is used as the dependent variable and the four mechanisms to control agency costs as independent variables. This study reports that in the context of Mauritius, FCF is significantly related to the dividend payout ratio whilst leverage and ownership dispersion are very weakly related. However, this study also reveals that insider ownership is not related to dividend policy. Therefore, the results from this study support the conclusion reached by earlier empirical researches on FCF but do not affirm the same conclusions as regards leverage, ownership dispersion and insider ownership.