Factors Influencing Dividend Policy in Bangladesh: Survey Evidence from Listed Manufacturing Companies in Dhaka Stock Exchange

Abstract

A firm considers various factors when approaching a dividend policy decision. To analyze the determinants of dividend policy in the context of Bangladesh, questionnaire survey has been done from financial decision makers of sample companies. The nonparametric test and factor analysis is used for interpreting results. The research finding exhibits that in the first stage, the economic related factor, legal constraint factor, capital market related factor, residual policy factor, capital source factor and clientele factors are considered in dividend decision making. Then in the second stage, the companies follow the preceding years’ pattern of dividend payment. In the next stage, dividend decision is made mainly on the level of earnings and liquidity. The decision maker, investors and other stakeholders should follow these findings.

Determinants of the dividend payout policy of multinational companies in Bangladesh: Evidence from Dhaka stock exchange

“…According to Anil and Kapoor (2008), profitability is the most important sign of DPR. Adaoglu (2000) researched emerging markets and argued that the main determinants of cash dividends are current-year earnings and emerging market firms follow unstable dividend payout policies which is also supported by Mahira (2012) and Islam and Adnan (2019). Le, Nguyen, and Tran (2019); Al-Kuwari (2009); Naceur, Goaied, and Belanes (2006); Patra, Poshakwale, and Ow-Yong (2012); Amidu and Abor (2006) and Jabbouri (2016) found a significant affirmative connection between profitability and DPP.…”

“…In Bangladesh, the majority of research focuses on local businesses. Research on manufacturing businesses listed on the DSE was carried out by Islam and Adnan (2019). Recently, there has not been a DPP study on MNCs in Bangladesh that focuses on DSE.…”

“…Sometimes companies reduce the dividend to ensure the payment of current debt obligations (Le et al, 2019) as the cash dividend decreases the cash of the firm. Companies mainly consider liquidity positions when making dividend decisions (Alshammari, 2012;Deshmukh, Goel, & Howe, 2013;Islam & Adnan, 2019;Khan & Ahmad, 2017). Okpara and Godwin (2010) also found a significant optimistic relationship between liquidity and DPP.…”

Determinants of Dividend Policy of Companies Listed in Dhaka Stock Exchange

“…26 Islam and Adnan (2018) observed that liquidity and present earnings are the most important determinants for the listed companies of Bangladesh in shaping their dividend policy. 27 The empirical results of the study of Mollah (2009) recommended that dividend pronouncements are mostly directed by lagged dividends and current profitability of companies listed on Dhaka Stock Exchange. Cash flow is recognized as a superior measure of the company's capability to pay dividends.…”