European Journal of Business Science and Technology 2018, 4(2):156-173 | DOI: 10.11118/ejobsat.v4i2.132

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

Mohammad Shahidul Islam1, ATM Adnan1
1 BGMEA University of Fashion & Technology, Dhaka, Bangladesh

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 observed result reveals that present earnings and liquidity are the most likely factors for the firm in deciding the payout policy.

Keywords: factor analysis, EPS, DPR, MM model, Lintner model
JEL classification: A10, A11

Published: December 28, 2018  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Islam, M.S., & Adnan, A. (2018). Factors Influencing Dividend Policy in Bangladesh: Survey Evidence from Listed Manufacturing Companies in Dhaka Stock Exchange. European Journal of Business Science and Technology, 4(2), 156-173. doi: 10.11118/ejobsat.v4i2.132
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Abor, J. and Fiador, V. 2013. Does Corporate Governance Explain Dividend Policy in SubSaharan Africa? International Journal of Law and Management, 55 (3), 201-225. Go to original source...
    2. Adeyemi, S. L. and Adewale, A. A. 2010. Evaluation of the Dividend Practices among Selected Nigerian Quoted Firms. Maiduguri Journal of Accountancy and Finance, 8 (1).
    3. Adhikari, B. K. 2013. Peer Influence on Dividend Policies. Presented at the 2013 FMA Meetings.
    4. Al-Malkawi, H.-A. N. 2007. Determinants of Corporate Dividend Policy in Jordan: An Application of the Tobit Model. Journal of Economic and Administrative Sciences, 23 (2), 44-70. Go to original source...
    5. Alshammari, T. Dividend Policies in Kuwait. In Proceedings of the Las Vegas International Academic Conference, pp. 356-361.
    6. Anil, K. and Kapoor, S. 2008. Determinants of Dividend Payout Ratios: A Study of Indian Information Technology Sector. International Research Journal of Finance and Economics, 15, 55-63.
    7. Archbold, S. and Vieira, E. F. S. 2010. Corporate Dividend Policies in Bank-based and Market-based Systems: Survey Evidence from UK and Portugal. Portuguese Journal of Management Studies, 15 (1), 35-64.
    8. Asghar, M., Shah, S. Z. A., Hamid, K. and Suleman, M. T. 2011. Impact of Dividend Policy on Stock Price Risk: Empirical Evidence from Equity Market of Pakistan. Far East Journal of Psychology and Business, 4 (1), 45-52.
    9. Baker, H. K. 2009. Dividends and Dividend Policy. John Wiley and Sons. Go to original source...
    10. Baker, H. K., Dutta, S. and Saadi, S. 2011. Management Views on Real Options in Capital Budgeting. Journal of Applied Finance, 21 (1), 18-29.
    11. Baker, H. K., Farrelly, G. E. and Edelman, R. B. 1985. A Survey of Management Views on Dividend Policy. Financial Management, 14 (3), 78-84. Go to original source...
    12. Baker, H. K., Mukherjee, T. K. and Paskelian, O. G. 2006. How Norwegian Managers View Dividend Policy. Global Finance Journal, 17 (1), 155-176. Go to original source...
    13. Baker, H. K. and Nofsinger, J. R. (eds.). 2010. Behavioral Finance: Investors, Corporations, and Markets. John Wiley and Sons.
    14. Baker, H. K. and Powell, G. E. 1999. How Corporate Managers View Dividend Policy. Quarterly Journal of Business and Economics, 38 (2), 17-35.
    15. Baker, H. K. and Powell, G. E. 2000. Determinants of Corporate Dividend Policy: A Survey of NYSE firms. Financial Practice and Education, 10, 29-40.
    16. Baker, H. K. and Powell, G. E. 2012. Dividend Policy in Indonesia: Survey Evidence from Executives. Journal of Asia Business Studies, 6 (1), 79-92. Go to original source...
    17. Baker, H. K., Powell, G. E. and Veit, E. T. 2002. Revisiting the Dividend Puzzle: Do All of the Pieces Now Fit? Review of Financial Economics, 11 (4), 241-261. Go to original source...
    18. Baker, M. and Wurgler, J. 2002. Market Timing and Capital Structure. The Journal of Finance, 57 (1), 1-32. Go to original source...
    19. Basnet, S. K. 2007. Dividend, Earnings and Stock Prices: A Case of Nepal. PhD Dissertation, Tribhuvan University, Kathmandu.
    20. Black, F. 1976a. The Dividend Puzzle. Journal of Portfolio Management, 2 (2), 5-8. Go to original source...
    21. Black, F. 1976b. Studies of Stock Price Volatility Changes. In Proceedings of the 1976 Meeting of the Business and Economic Statistics Section, pp. 177-181.
    22. Brav, A., Graham, J. R., Harvey, C. R. and Michaely, R. 2005. Payout Policy in the 21st Century. Journal of Financial Economics, 77 (3), 483-527. Go to original source...
    23. Cattell, R. B. 1966. The Scree Test for the Number of Factors. Multivariate Behavioral Research, 1 (2), 245-276. Go to original source...
    24. Chiang, K., Frankfurter, G. M., Kosedag, A. and Wood, B. G. 2006. The Perception of Dividends by Professional Investors. Managerial Finance, 32 (1), 60-81. Go to original source...
    25. Dalmácio, F. Z. and Corrar, L. J. 2007. A concentração do controle acionário e a política de dividendos das empresas listadas na Bovespa: uma abordagem exploratória à luz da teoria de agência. Revista de Contabilidade e Organizações, 1 (1), 16-29. Go to original source...
    26. Deshmukh, S., Goel, A. M. and Howe, K. M. 2013. CEO Overconfidence and Dividend Policy. Journal of Financial Intermediation, 22 (3), 440-463. Go to original source...
    27. Dhanani, A. 2005. Corporate Dividend Policy: The Views of British Financial Managers. Journal of Business Finance and Accounting, 32 (7-8), 1625-1672. Go to original source...
    28. Fama, E. F. and Babiak, H. 1968. Dividend Policy: An Empirical Analysis. Journal of the American Statistical Association, 63 (324), 1132-1161. Go to original source...
    29. Gill, A., Biger, N. and Mathur, N. 2012. Determinants of Equity Share Prices: Evidence from American Firms. International Research Journal of Finance and Economics, 90, 176-192.
    30. Glen, J. D., Karmokolias, Y., Miller, R. R. and Shah, S. 1995. Dividend Policy and Behavior in Emerging Markets: To Pay or Not to Pay. IFC Discussion Paper No. 26.
    31. Haleem, F., Ijaz-ur-Rehman and Javid, A. Y. 2011. The Dividend Policy in Manufacturing Sector of Pakistan: The Perception of Corporate Managers. Journal of Economics and Behavioral Studies, 3 (1), 63-75. Go to original source...
    32. John, A. O. 2018. Managers' Perception of Factors Influencing Dividends Decision in Nigeria. International Journal of Advances in Management and Economics, 2 (2), 135-140.
    33. Kania, S. L. and Bacon, F. W. 2005. What Factors Motivate the Corporate Dividend Decision? ASBBS E-Journal, 1 (1), 97-107.
    34. Khan, K. I., Aamir, M., Qayyum, A., Nasir, A. and Khan, M. I. 2011a. Can Dividend Decisions Affect the Stock Prices: A Case of Dividend Paying Companies of KSE. International Research Journal of Finance and Economics, 76, 69-74.
    35. Khan, N. U., Burton, B. M. and Power, D. M. 2011b. Managerial Views About Dividend Policy in Pakistan. Managerial Finance, 37 (10), 953-970. Go to original source...
    36. Khurana, P. K. 1985. Corporate Dividend Policy in India. Panchsheel Publishers.
    37. Lintner, J. 1956. Distribution of Incomes of Corporations Among Dividends, Retained Earnings, and Taxes. The American Economic Review, 46 (2), 97-113.
    38. Manandhar, K. D. 2002. Corporate Dividend Policy and Practice in Nepal. PhD Dissertation, Tribhuvan University, Kathmandu.
    39. Miller, M. H. and Modigliani, F. 1961. Dividend Policy, Growth, and the Valuation of Shares. The Journal of Business, 34 (4), 411-433. Go to original source...
    40. Mizuno, M. 2007. Payout Policy of Japanese Firms: Analysis on the Survey of Four Industries Listed on the Tokyo Stock Exchange. Pacific Economic Review, 12 (5), 631-650. Go to original source...
    41. Naser, K., Nuseibeh, R. and Rashed, W. 2013. Managers' Perception of Dividend Policy: Evidence from Companies Listed on Abu Dhabi Securities Exchange. Issues in Business Management and Economics, 1 (1), 1-12.
    42. Partington, G. H. 1989. Variables Influencing Dividend Policy in Australia: Survey Results. Journal of Business Finance and Accounting, 16 (2), 165-182. Go to original source...
    43. Pradhan, R. S. and Adhikari, N. 2003. A Survey of Dividend Policy and Practices of Nepalese Enterprises. In Pradhan, R. S. Research in Nepalese Finance, pp. 220-250. Buddha Academic Pub.
    44. Ross, S. A., Westerfield, R. and Jordan, B. D. 2008. Fundamentals of Corporate Finance. Tata McGraw-Hill Education.
    45. Shah, S. Z. A., Yuan, H. and Zafar, N. 2010. Earnings Management and Dividend Policy: An Empirical Comparison between Pakistani Listed Companies and Chinese Listed Companies. International Research Journal of Finance and Economics, 35, 51-60.
    46. Vieira, E. F. S. 2011a. Investor Sentiment and the Market Reaction to Dividend News: European Evidence. Managerial Finance, 37 (12), 1213-1245. Go to original source...
    47. Vieira, E. F. S. 2011b. Firm-Specific Factors and the Market Reaction to Dividend Change Announcements: Evidence from Europe. Marmara Journal of European Studies, 19 (1), 1-25. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-ShareAlike 4.0 International License (CC BY-SA 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content