Dividend Policy and Shareholders’ Value: Evidence from Listed Companies in Ghana

Abstract

This study examines the effect of dividend policy on shareholder value of listed companies in Ghana. It analyses the factors affecting dividend policy and how dividend policy affects shareholders’ value. Data from 2009 to 2014 financial reports of listed companies on the Ghana Stock Exchange were used. The data was analysed using pooled OLS panel regression. The findings reveal that ROE, firm age, tax, tangibility, GDP growth and interest rate are statistically significant in explaining dividend policy. The study suggests that firms consider the use of dividend yield as an appropriate measure when making choices in dividend policy. The study finds a positive relationship between dividend per share and shareholders’ value. More so, firms with higher dividend yield tend to reduce shareholders’ value, as confirmed by a negative and significant relationship between dividend yield and shareholders’ value. It concludes that dividend policy has a strong relationship with shareholders’ value. The study recommends that managers should embark on prudent investment activities that would generate higher returns (both dividend and capital gains) to shareholders in order to increase shareholder value.

Do Shareholders Fight for Firm Value or Market Value in Emerging Markets? The Mediating Effect of Board Structure Dynamics on Dividend Policy Decision

“…Ofori‐Sasu et al . () examined the effect of the dividend policy decision on shareholders’ value of listed companies in Ghana using market value per share held by shareholders, and they found that dividend per share improved shareholders’ value of listed firms in Ghana.…”

“…Dividend policy decision has been an important predictive power used to forecast the wealth of shareholders (Ofori‐Sasu et al ., ). Board structure, which involves the collective role of board members and board characteristics, influence dividend payout decision and also builds investors’ confidence (Fuzi et al ., ).…”

“…Dividend policy is one of the strategic financial decisions that lie in the hands of the board of directors. The decision whether to pay out a dividend to shareholders or retain company profit for future gains cannot be ignored among corporations since dividend policy has a positive effect on shareholder wealth (Ofori‐Sasu et al ., ). In addition, the board of directors plays a significant role in influencing dividend policies in order to improve shareholders’ wealth.…”

“…Second, dividend policy increases shareholder wealth at the market level when interacted with board structure dynamics, but does not improve shareholder wealth at the firm level. Although, a previous study has tested the relationship between dividend policy and shareholder value at the firm level (Ofori‐Sasu et al ., ), there is a dearth of studies that has examined the effect of dividend policy on shareholder wealth at the market level as well as the interaction effect of board structure dynamics on the influence of dividend policy decision on shareholder wealth. The paper is conducted in the context of emerging markets, particularly in Ghana, where the dividend policy framework and board structure dynamics are relatively undeveloped and the firms are the main drivers of economic activities.…”

Testing the Quiet Life Hypothesis in the African Banking Industry

“…Moreoover, the bulk of recent financial development literature on Africa has not focused on market power in the banking industry(Daniel, 2017;Fowowe, 2014;Wale & Makina, 2017;Chikalipah, 2017;Bocher et al, 2017;Osah & Kyobe, 2017; Oben & Sakyi, 2017;Ofori-Sasu et al, 2017;Chapoto & Aboagye, 2017; Iyke & Odhiambo, 2017;Boadi et al, 2017).…”