Assessing the Determinants of Profit Allocation in Albanian Enterprises: An Empirical Analysis using Regression Techniques

Abstract

Dividend payout decisions are a cornerstone of financial theory, continuing to pose a significant challenge since the assertion that dividends hold no relevance in perfect capital markets (Miller and Modigliani's,1961). Despite extensive research identifying numerous factors influencing these decisions, no universally applicable framework has materialized, primarily due to the heterogeneous effects of country-specific, company-specific, and market-specific variables. When a company generates net profit, it is confronted with pivotal choices: reinvestment in core operations, dividend disbursement, debt settlement, or share repurchase. The determination of how profits are allocated is of critical importance, as it profoundly impacts the company’s valuation and its long-term financial trajectory. This study aims to investigate the critical determinants influencing profit distribution within Albanian enterprises, utilizing sophisticated regression techniques for rigorous empirical analysis. By leveraging regression models, the research scrutinizes the financial data of Albanian firms from 2018 to 2022. The insights derived from this analysis provides the explainability of factors shaping profit distribution strategies, providing a solid foundation for strategic management and evidence-based decision-making in Albanian businesses. In our research, data sources include financial statements collected from Albanian enterprises by the National Business Center. The results of this research will offer valuable perspectives on profit distribution management within Albanian businesses, enhancing the overall comprehension of the diverse factors that impact financial decision-making processes.