Journal Article

Is Firm Size a Factor in the relationship with foreign direct investment in South Africa? version 1; peer review: awaiting peer review

Gurr, Kerry-Lee, Aliamutu, Kansilembo

2026

Overview

Background Foreign direct investment plays a significant role in influencing corporate financial decisions in emerging markets, yet the extent to which firm characteristics shape this relationship remains unclear. In particular, the role of firm size in moderating the effect of foreign ownership on dividend payment behaviour has received limited empirical attention. This study examines whether firm size influences the relationship between foreign direct investment and the likelihood of dividend payments among firms listed on the Johannesburg Stock Exchange. Methods Study employs a quantitative research design using secondary data from audited annual financial statements of non-financial firms listed on the Johannesburg Stock Exchange over the period 2021 to 2024. A final sample of 320 firm-year observations is analysed. Logistic regression models are used to estimate the probability of dividend payments, while controlling for firm-specific and governance characteristics. Interaction terms are included to assess the moderating effect of firm size, and robustness checks are conducted using alternative measures of foreign investment. Results Findings reveal a positive and statistically significant relationship between foreign direct investment and the likelihood of dividend payments. A one-unit increase in foreign ownership is associated with an approximate 19.5 percent increase in the probability of dividend payments. The results further show that firm size significantly strengthens this relationship. For larger firms, foreign direct investment increases the likelihood of dividend payments by approximately 28.5 percent, while the effect is weaker and statistically insignificant for smaller firms. Additional results indicate that leverage, sales growth, and board size are positively associated with dividend payment propensity. Conclusions Study concludes that foreign investors exert a stronger influence on dividend policy in larger firms, highlighting the importance of firm size in shaping corporate financial behaviour. These findings contribute to a better understanding of how ownership structure and firm characteristics interact in emerging markets.