Dividend Policy and Its Impact on Shareholders’ Wealth: Case of Non-Financial Firms

Abstract

Purpose: The research is about the effect of dividend policy on shareholders’ wealth for Dar es Salaam Stock Exchange listed non-financial firms in Tanzania from 2005 to 2019. Design/methodology: The research employs secondary data information from firms’ financial reports as published on the Dar es Salaam Stock Exchange website, using descriptive statistics, panel dynamic least square method, and cointegration analysis to test the association between variables. Findings: The results show that at 95 percent level of significance, dividend per share have significant positive effects on all proxies for shareholders’ wealth. However, dividend yield has insignificant negative effects on all proxies for shareholders’ wealth. The moderating variable indicates that investment opportunities have positive and significant effects on all the shareholders’ wealth proxies, which is one of the factors that strengthen the relationship between dividend policy and shareholders’ wealth. Originality/value: This result, being the first study done in Tanzania, apart from helping stakeholders to avoid generalization of findings from developed economies to developing countries, will also help firms’ managers on how to implement shareholders’ wealth-maximizing strategies and capital accumulation for their internal growth. Furthermore, the results will enable potential investors and shareholders to decide whether to invest in certain firms or not, and whether to sell their shares and leave or retain them.

Stock Market Reaction to Dividend Announcements: Evidence from the Russian Market

“…According to this principle, investors perceive dividends as a more secure source of income compared to the anticipation of the company's future growth and potential high returns Rane [16]; Uddin, Chowdhury [17] Negative effect The authors attributed this result to the absence of long-term growth (signal effect) and tax effect Adesola, Okwong [18]; Ling et al [19] No effect According to researchers, dividends are a reflection of the company's past financial results, and not an expectation of future growth or deterioration Grullon et al [4];…”