Impact of Dividend Policy on Corporate Profitability: Evidence from Listed Beverage Food and Tobacco Companies on Colombo Stock Exchange (CSE) in Sri Lanka
15 Pages Posted: 6 Dec 2015
Date Written: December 7, 2015
Abstract
Dividend policy is the set of guidelines a company uses to decide how much of its earnings it will pay out to shareholders. Dividend policy is considered the most important policy among the corporate policies. Several theories and models have been documented on the relevance and irrelevance of the dividend policy. Hundreds of authors continue to come up with various conclusions with regard to dividend policy from their empirical studies. For this particular study, data from 15 listed companies were collected on random basis to evaluate the dividend policy on corporate profitability in the beverage food and tobacco companies listed on Colombo Stock Exchange in Sri Lanka for the period of 2010-2014. Returns on equity and return on assets were used as the determinants of corporate profitability whereas dividend payout ratio and dividend per share were used as the measures of dividend policy. Descriptive statistics, correlation and regression were used to analyze the study. However, the analysis proved insignificant relationship between dividend payout and corporate profitability. Also, dividend per share has significantly correlated with ROE and ROA which is significant at 1 percent level of significance. Outcomes of the study will be useful to beverage food and tobacco companies’ decision regarding dividend policy and to the academics, practitioners, policy makers and investors to create suitable policy formulations for the companies.
Keywords: Dividend Policy, corporate profitability, Colombo Stock Exchange (CSE)
JEL Classification: G30, G32, G35, G39
Suggested Citation: Suggested Citation