On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?

Dividend policy is among the most debated topics in corporate Finance. Determinants of corporate dividend, most commonly firm specific determinants, have attracted much attention of the researchers. This paper mainly investigates the external determinants of dividend policy in Tanzania. The study al...

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Autor principal: Josephat Lotto
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Lenguaje:EN
Publicado: Taylor & Francis Group 2020
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spelling oai:doaj.org-article:9dcb43fd74f1489589ab3e62c17578642021-12-02T18:21:14ZOn an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?2331-197510.1080/23311975.2020.1787734https://doaj.org/article/9dcb43fd74f1489589ab3e62c17578642020-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2020.1787734https://doaj.org/toc/2331-1975Dividend policy is among the most debated topics in corporate Finance. Determinants of corporate dividend, most commonly firm specific determinants, have attracted much attention of the researchers. This paper mainly investigates the external determinants of dividend policy in Tanzania. The study also checks the influence of firm-specific factors that determine dividend decision of non-financial firms listed in Dar es Salaam Stock Exchange using a panel data analysis for a period 2008–2017. The paper reports that gross domestic product (GDP) and inflation have both statistically negative signifant relationship with the firm payout ratio. This implies that in a country where GDP is high, firms are less likely to consider paying dividends. During high GDP levels, the economic environment is potentially conducive for potential investment, and therefore re-investing the corporate profit is relatively a wise decision than distributing it back to owners as dividend. Also in an inflationary environment, funds generated are often are not sufficient to replace a firm’s assets as they become obsolete. Under these circumstances, a firm may be forced to retain a higher percentage of earnings to maintain the earning power of its asset base that is why during this time less dividend is expected by shareholders. Furthermore, the paper reports that firm-specific factors such as profitability, liquidity, firm size, leverage and firm growth are also influencial in determining corporate dividend policy. More specifically, large-sized firms, highly profitable firms are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will therefore, save money to finance their expansion and honor their debt obligations.Josephat LottoTaylor & Francis Grouparticledividend payoutleverageprofitabilitygrowthliquiditydividend puzzleBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 7, Iss 1 (2020)
institution DOAJ
collection DOAJ
language EN
topic dividend payout
leverage
profitability
growth
liquidity
dividend puzzle
Business
HF5001-6182
Management. Industrial management
HD28-70
spellingShingle dividend payout
leverage
profitability
growth
liquidity
dividend puzzle
Business
HF5001-6182
Management. Industrial management
HD28-70
Josephat Lotto
On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
description Dividend policy is among the most debated topics in corporate Finance. Determinants of corporate dividend, most commonly firm specific determinants, have attracted much attention of the researchers. This paper mainly investigates the external determinants of dividend policy in Tanzania. The study also checks the influence of firm-specific factors that determine dividend decision of non-financial firms listed in Dar es Salaam Stock Exchange using a panel data analysis for a period 2008–2017. The paper reports that gross domestic product (GDP) and inflation have both statistically negative signifant relationship with the firm payout ratio. This implies that in a country where GDP is high, firms are less likely to consider paying dividends. During high GDP levels, the economic environment is potentially conducive for potential investment, and therefore re-investing the corporate profit is relatively a wise decision than distributing it back to owners as dividend. Also in an inflationary environment, funds generated are often are not sufficient to replace a firm’s assets as they become obsolete. Under these circumstances, a firm may be forced to retain a higher percentage of earnings to maintain the earning power of its asset base that is why during this time less dividend is expected by shareholders. Furthermore, the paper reports that firm-specific factors such as profitability, liquidity, firm size, leverage and firm growth are also influencial in determining corporate dividend policy. More specifically, large-sized firms, highly profitable firms are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will therefore, save money to finance their expansion and honor their debt obligations.
format article
author Josephat Lotto
author_facet Josephat Lotto
author_sort Josephat Lotto
title On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
title_short On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
title_full On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
title_fullStr On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
title_full_unstemmed On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
title_sort on an ongoing corporate dividend dialogue: do external influences also matter in dividend decision?
publisher Taylor & Francis Group
publishDate 2020
url https://doaj.org/article/9dcb43fd74f1489589ab3e62c1757864
work_keys_str_mv AT josephatlotto onanongoingcorporatedividenddialoguedoexternalinfluencesalsomatterindividenddecision
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