How Firm Characteristics Affect Dividend Policy: An Empirical Study of Listed Beverage Food and Tobacco Companies in Sri Lanka

Abstract

Dividend policy remains one of the most controversial issues in corporate finance. For more than half a century, financial economists have engaged in modeling and examining corporate dividend policy. This research aims to examine the firm’s characteristics which affect dividend policy for listed Beverage food and Tobacco companies in Sri Lanka. In particular, the research investigates the extent to which firm’s characteristics such as firm size, profitability; leverage and tangibility affect corporate dividend policy for the period from 2008 to 2011. Pearson’s correlation and multiple regression models are used to analyze the data. Based on the sample of 10 listed Beverage food and Tobacco companies, it is found that some of the firm characteristics have influenced more on the dividend policy decision among listed Beverage food and Tobacco companies in Sri Lanka. The results reveal that firm size and profitability have the positive impact on dividend policy. Further Leverage has the negative impact on dividend policy.

Keywords: Dividend Policy, Firm Size, Profitability, Leverage, Tangibility