The dependent variable of this study is the dividend policy while the independent variables are earnings, cash flow, debt, investment opportunities, firm size and growth. Many researchers try to present empirical evidence and differenttheories,where the ultimate goal is. The study has been conducted on nonfinancial sector of. While all the pieces to the dividend puzzle may not be in place. To find out the determinants of dividend payout policy dynamic panel regression has been performed. This paper aims to investigate the firmlevel factors influencing the dividend.
Although there are hints of reductions in the propensity to. Usually a company retains a part of its earnings and distributes the other part as dividend. Nzse firms traditionally have high dividend payouts compared with companies in the us. School of economics and finance, university of western sydney, sydney. Determinants of dividend payout of financial firms and non. Many researchers try to uncover the issue regarding the determinants of.
Mediating role of dividend policy among its determinants. The question, when and why do firms pay dividends, is still valid. International research journal of finance and economics, 29, 110125. The study employs primary data and uses a questionnaire as a data collection tool, and involves fifteen companies listed at the dse as of december, 2014. At the core of a companys dividend policy are two basic options for how to handle earnings. There are five important determinants identified in this study i. Amidu and abor 2006 examined the determinants of dividend pay ratio on the platform of financial statements of accepted companies in african exchange within a 6year period. Amidu and abor 2006 on their study on determinants of dividend payout ratio in kenya documented that, the results show positive relationships between dividend payout and profitability, cash flow, and tax. Pdf analysis of the determinants of dividend policy.
This result is with line with the agency theory of dividend policy. Many authors say, dividend policy has insignificant impact on the market value of the firm but the dividend policy determined based on the investment opportunities available for the company. I m pandey 11 th edition of financial management evaluated the dividend policy determinants and its impact on market value of scrip. Pdf determinants of dividend policy in saudi listed.
Dividend policy of firms is one of the most controversial issues of theoretical finance. Indeed, measurements of dividend policy and some determinants of dividend policy vary across studies. Dividend policy is the policy used by a company to decide how much it will payout to shareholders in the form of dividends. The data employed is derived from the thompson reuters database covered the period from 2000 to 2012. Dividend policy is one of the most debated issues within corporate finance. It is a difficult task for management to allocate a sufficient amount in both segments, especially to prevent from agency problems. Dividend policy needs a careful selection of its determinants. One explanation for this is the clientele hypothesis. It complements the data by using data collected from students of masters of finance and. Whatever decision heshe makes, whether it is investment decision, financing decision or dividend decision, heshe has to maximise value of the firm. This means that firms generally prefer not to change dividends, particularly downwards. Even after decades of investigations, scholars still disagree on the factors that influence dividend decisions of companies. This paper examines the determinants of dividend policy. That is, firms tend to have a certain class of shareholders who depend upon the firms dividend policy to obtain.
There are two major schools of thought among finance scholars regarding the effect dividend policy has on a firms value. Understanding the sources of value creation has always been core issue in finance. Factors affecting dividend policy various factors that have a bearing on the dividend policy maximisation of owners wealth is the objective of the financial managers job. Although miller and modigliani argue that dividend policy does not have a significant effect on a firms value,11 myron gordon, david durand, and john lintner have argued that it does.
Although cash holding and dividend policy share the same determinants, they do not. Determinants of dividend policy are investigated employing dividend yield as a proxy. Findings reveal that the determinants of cash holding are dividends, leverage, growth, size, risk, profitability and working capital. Many of the studies concluded that dividend payment behavior in emer ging countries is significantly different than that of develope d markets. To empirically investigate what firmspecific factors influence a firms dividend policy based on swedish market by studying all small, medium, large caps in sweden. The determinants of dividend policy for nonfinancial companies in. Issues concerning dividends and dividend policy have always posed challenges to both academics and professionals. Determinants of dividend policy in financial management.
Determinants of dividend policy of public listed companies. There are several determinants of dividend policy that are taken into account, including the desire to remain within the parameters of current trade regulations, and to protect the financial stability of the company. They however concluded that profitability have a positive and significant impact on the dividend policy of nigerian firms. In addition, the study fills the lacuna in the existing literature by focusing on the issue of dividend policy determinants in the context of an emerging economy, namely, malaysia. This article examines the determinants of dividend policy of listed companies at the dar es salaam stock exchange dse. Going back to the definition, the value of the firm, which is the sum of equity, debt and.
Major theoretical advances in dividend policy decisionmaking have been made over the last few decades. The hausman test reveals that the p value is higher than 0. Establishing a dividend policy is important for business that intends to provide stock issues for investors. Findings from their study show that firms dividend policy follows the random talk model. This paper sought to address this problem by investigating the determinants of dividend policy in kenya. The results indicate that agency cost is positively related to dividend policy for the basic. The present study is an endeavour to evaluate the determinants of dividend policy. There are various determinants of the dividend policies of companies and researchers have worked a lot in determining which factor most contribute to the decision making of the dividend. Pdf the present study is an endeavour to evaluate the determinants of dividend policy. The dividend payout policy is one of the most debated topics within corporate finance and some academics have called the companys dividend payout policy an unsolved puzzle. Determinants of dividend policy in saudi listed companies. What factors do companies consider for dividend policy. However, different researchers assume that uncertainty, corporate social responsibility csr and stakeholders interest are the important determinants of dividend policy. This study use a panel data analysis method to investigate the determinants of dividend policy corporate governance mechanism, profitability, systematic risk, firm size, and leverage in in.
Determinants of dividend policy, dividend policy, dividend yield, birdinhand theory, agency theory. Similarly, many regulations from developed market including dividend policy of corporation are amended in the turkish commercial code of. The variable beta, however, has a strong negative correlation with dividend payout ratio. The study considered dividend policy as the it describes the amount of cash to be distributing. However, the industryspecific determinants of dividend policy display a number of variances that could plausibly be used as an indication of the selection of stocks in specific industries by potential investors. Interindustry dividend policy determinants in the context. Some of the most important determinants of dividend policy are. Evidence from malaysian firms article pdf available in research journal of finance and accounting january 2015 with 2,034 reads how we measure reads. Vast literature has examined the dividend policies of firms from developed countries, especially. Determinants of the dividend policy of companies listed on. Determinants of corporate dividend payout in nepal. Dividend policy is an unsolved mystery in the field of finance.
Moreover, the firms with fast growth distribute the. The analysis of the determinants of corporate dividend policy belongs to the core issues in modern financial theory breuer et al. The determinants of dividend policy in pakistan munich personal. The results suggest that, profitable firms tend to pay high dividend. Allen and michaely, 2003 and brealey and myers 2005. A case of pakistan engineering sector kashif imran 1 the return on investment can be divided in capital gain and dividend payouts. Originalityvalue the study extends empirical evidence on dividend policy determinants which are currently reported to be inconclusive.
Business perspectives determinants of dividend policy. The present study is attempted to explore the influence of financial efficiency, safety, risk and profitability on dividend policy using panel data of 10 commercial. Whereas the determinants of dividend payout are cash, leverage, growth, size, risk, profit. From the view point of value maximization, the value of shares depends very much on. Pdf pakistans capital market and economy have significant features for examining the dynamics of the dividend policy. Obenbe et al 2014 in a study of nonfinancial firms in nigeria, observed that profitability is an important determinant of the firms dividend policy. Determinants of corporate dividend policy in jordan. A dividend policy is a companys approach to paying dividends to shareholders. Even though an extensive amount of research regarding dividends has been conducted, there is no uniform answer to the question.
Dividends and dividend policy as part of the robert w. Research journal of finance and accounting issn 22221697 paper issn 22222847 2847. The above fact provides the reason for this researchs examination of the determinants of dividend policy in viet nam, a developing country with the emerging stock market in asia. The analysis was depending on some theories that affect the dividend policy such as. Kolb series in finance, dividends and dividend policy aims to be the essential guide to dividends and their impact on shareholder value. A research paper on impact of dividend policy determinants. International evidence on the determinants of dividend policy abstract in the u. Even though an extensive amount of research regarding dividends has been conducted, the results and conclusions are not without controversy. Hence, this paper explored the determinants of dividend policy of companies listed on the stock exchange of mauritius.
The determinants of dividend policy the objective of this paper is to address the basic question of the relevance of dividend policy for the value of the firm. Methodology, data, hypotheses the paper investigates the determinants of dividend policy of polish nonfinancial companies listed on the warsaw stock exchange in poland. Dividends are payouts of company earnings to shareholders based on the number of owned shares. In this study, we analyze the determinants of the corporate dividend policy using a sample of firms listed on new zealand stock exchange nzse. In investigating the determinants of dividend policy naceur et al. The study found that at the pooled data level for all sectors, free cash flow, return on assets, return on equity, earning per share, market to book value and market capitalization have significant positive correlation with dividend payout ratio. Javid 2009 examines the dynamics and determinants of dividend payout policy of 320 nonfinancial firms listed in karachi stock exchange during the period of 2001 to2006. The study has been conducted on nonfinancial sector of pakistan. Here, a firm settles on the portion of revenue that is to be disseminated to the shareholders as dividends or to be pushed back into the firm. Introduction dividend policy is an important topic from of the basic theory of corporate finance topics and also the most controversial.
658 1130 1170 1004 920 824 973 527 942 1467 1519 370 746 613 1262 155 197 149 1249 1213 1201 444 917 80 160 211 662 1350 196 185 340 422 603 141 1337 258 199 451