Dividend policy determinants of Sri Lankan firms: a triangulation approach

Abstract

Purpose The purpose of this paper is to identify the dividend policy determinants of Sri Lankan firms and why they pay dividends. Design/methodology/approach The study uses several quantitative approaches to investigate dividend determinants using market (secondary) data of 190 Sri Lankan firms and 1,330 firm-year observations. Dividend determinants are also identified using survey (primary) data from 141 of the 190 firms. Triangulation is then used to facilitate validation of the data through cross-verification from two data sources. Findings Analysis of the market data reveals that firm size, industry impact, corporate governance, free cash flow, earnings, past dividends, profitability, investment opportunities, net working capital, concentrated ownership structure and investor preference represent the most important dividend determinants. Survey data confirm these findings. The evidence supports the pecking order, signaling, free cash flow, catering and outcome theories using both secondary and primary data and the bird-in-the-hand theory using survey data. Research limitations/implications The findings are useful not only for corporate decision makers in establishing an appropriate dividend policy but also for shareholders in making investment decisions. Because the current study is limited to Sri Lanka, future researchers should study the same phenomenon in other countries using the triangulation approach. Originality/value This study provides a hybrid approach to dividend policy research by using both primary and secondary data in a single study. It is the first dividend study in Sri Lanka to use a triangulation approach.

Corporate Governance and Dividend Policy in the Banking Sector on the Indonesian Stock Exchange

“…They state that independent boards, in companies abiding by Islamic law in Indonesia are positively related to dividend policies. The study [58] findings are not aligned with a study of Baker et al (2019), who argued that the independent board is one of Sri Lanka's most significant determinants of dividends.…”

Firm Level Determinants and Dividend Policy in Pakistan

“…Profitability is positive significant factor of dividend policy of non-financial Pakistani listed firms. The finding is consistent with the earlier studies [24][25][26]. Findings of profitability supports signaling theory [35,36] that when firms are more profitable, it will pay more dividend to investors.…”

“…Conversely, profitability, past dividends and dividend premium are negative associated to dividend payout. Furthermore, [25] found that profitability, past dividends, investor preferences and investment opportunities are significant determinates of dividend policy and all are positive associated to dividend policy. Grounded on extensive literature, this research study anticipates that profitability, free cash flow, firm size, financial leverage, liquidity, investment opportunities and corporate tax has an impact on dividend payout of non-financial Pakistani listed firms.…”

Effect of family control on corporate dividend policy of firms in Pakistan

“…Further, previous studies focus on determining the determinants of the dividend policy of firm (Baker and Powell, 2000;Ben et al, 2006;Denis and Osobov, 2008;Ahmed and Javid, 2009;Mehta, 2012;Yousaf and Ismail, 2016;Baker et al 2019) without segregating the family and non-family firms. Thus, this paper contributes to the strand of literature on the determinants of corporate dividend policy in two ways: first, by accounting for family control; second, by examining the moderating role of family control on 'the impact of firm-specific factors on the dividend policy'.…”