The moderating effect of audit quality and COVID-19 on the dividend payout-firm performance relationship : Egypt evidence

This study examines the moderating influence of audit quality on the relationship between dividend payout and corporate financial performance in emerging markets. Further, it investigates if the COVID-19 pandemic influences the relationship between dividend payout and corporate financial performance. This study uses a sample of non-financial firms listed on the Egyptian Stock Exchange’s EGX 100 Index during 2015–2021, which was beneficial to capture the influences brought about by the COVID-19 pandemic that broke out in late 2019. Pooled Ordinary Least Square (OLS), fixed effect regressions with Robust Standard Errors, and the system GMM estimations are used to examine the research hypotheses. We found that dividend payout has a significant positive influence on corporate financial performance. However, the interaction term between dividend payout and audit quality has an insignificant influence on financial performance, which indicates the low quality of audits conducted in emerging markets. Finally, consistent with the widely reported economic consequences of the latest pandemic, the interaction term between dividend payout and COVID-19 has a significant negative effect on financial performance. This study contributes to the literature by examining the moderating influence of audit quality on the association between dividend payout and financial performance in an emerging African market. By considering the role that can be played by determinants or moderating factors such as audit quality and the COVID-19 pandemic, investors could be better equipped to project corporate dividend policies and their implications for companies’ performance and devise their investment strategy effectively.