Foreign institutional ownership and dividend payout in Palestine: the moderating effect of leverage

The purpose of this study is to examine the influence of foreign institutional ownership on dividend payouts of Palestinian nonfinancial firms and the role that leverage plays in moderating this influence. The final sample of the study consists of 24 Palestinian listed firms. The study covers a period of 11 years, starting from 2013 to 2023. To analyze both direct and moderating effects, the study estimated four specifications using a panel binary logit model for the propensity to pay dividends and a panel censored Tobit model for dividend intensity. Foreign institutional ownership is positively and significantly associated with dividend payouts, supporting agency, signaling, and institutional theories in the Palestinian context. However, its interaction with leverage is significantly negative, pointing to a substitutional rather than complementary relationship. The findings guide managers in determining dividend decisions, foreign investors in selecting firms with dividend preferences, and policymakers in promoting foreign investment while monitoring leverage to protect minority shareholders. The study contributes by examining leverage as a moderator of the foreign institutional ownership–dividend payout relationship in Palestine’s under-researched institutional context, offering novel insights for theory and practice.