Stock Market Investors’ Guide to Corporate Dividend Policy: Evidence from Pharmaceuticals and Chemicals Industries in Bangladesh

Abstract

Dividend policy has been an important component in the arena of financial literature and providing evidence that dividend payout decisions are affected by various factors. Numerous studies have been conducted so far on corporate dividend policy in Bangladesh. The pharmaceuticals and chemicals industries of Bangladesh offer a lot of investment panorama for the retail investors. This research has been an endeavor to determine the factors affecting the dividend policy of these promising industries, and guide the investment decisions of the equity investors. In this attempt, this study is also a unique one to incorporate the chemicals industry along with the pharmaceuticals industry as both the industries constitute the 'pharmaceuticals and chemicals sector' listed in the stock market of Bangladesh. The study is a quantitative one based on secondary data. It comprises of different statistical analyses such as descriptive statistics, correlation matrix and multiple linear regression analysis, etc. Firm size, growth, liquidity, profitability, last year's dividend and P/E ratio are used as dependent variables. Besides, ownership structure, firm age, market share, and risk are used as control variables. The study explores that firm size has significant negative and last year's dividend ISSN 1946-052X 2017 ajfa.macrothink.org 167 has significant positive relationship with dividend payout. However, dividend payout does not depend on firm growth, liquidity, profitability and P/E ratio of a firm. The research outcome may have important implications for the improvement of investors' perceptions, which may assist them in their investment decisions in the researched industries. Certainly more work lies ahead to add to explanations for why some of the factors affect the dividend policy of the industries, while others have no significant impact thereon. Asian Journal of Finance & Accounting

The Retained Earnings Effect on the Firm’s Market Value: Evidence from Jordan

“…They also discovered a connection between a company's cash flow and dividend payouts. Chowdhury and Jannatunnesa (2017) found that firm size has a significant negative relationship with dividend payout and that last year's dividend has a significant positive relationship with dividend payout in an analysis of pharmaceuticals and chemical companies listed on the Dhaka Stock Exchange. Dividend payout, on the other hand, is unaffected by a company's rise, liquidity, profitability, or P/E ratio.…”

“…According to a review of the previous literature, it is noted that most of the prior studies investigated the effect of dividend per share and other dividend payout ratios on share prices, and this included either one industry sample or more compared to a lower number of prior studies that investigated the effect of earnings retention ratios on share prices (Nishat 1992;Marsh and Power 1999;Al-Twaijry 2007;Misir and Huq 2007;Ahmed and Javid 2008;AlTroudi and Milhem 2013;Hunjra et al 2014;Saeed et al 2014;Chowdhury and Jannatunnesa 2017). Even though the literature has clarified the important role of retained earnings, there are still few studies that have investigated the impact of the retention per share ratio compared with the dividend per share ratio on the firm value, which is still unexplored in emerging markets and requires more research (Yemi and Akinadewo 2018).…”