IDEAS home Printed from https://ideas.repec.org/a/rnd/arimbr/v10y2019i4p14-21.html
   My bibliography  Save this article

Analysis of the Interaction between Dividend Policy and Firm Performance in Manufacturing Sector

Author

Listed:
  • Shankar Kumar Singh Jha
  • Usama Aziz

Abstract

The purpose of this study is to investigate internal determinant factors of dividend policy in manufacturing firms. The study considers the impact of dividend payout ratio, signalling, earnings per share and risk on firm performance. This research also tries to create a link between dividend policy and firm performance. In the same way, the research is also aimed to create a link between these factors. Such as, the current link between the dividend policy and firm performance. It will elaborate this through current and previous studies as a whole. This study used primary data from the listed manufacturing firms in order to check the effects of dividend policy on firm performance. Data was collected from the primary source. The survey questionnaire was used to collect data from top management in order to highlight the impact of dividend policy on firm performance. Multi-regression analyses were undertaken to identify attributes that influence dividend policy. The results of the study demonstrate that all the variables are significant thus they have a positive impact on firm performance. The study established the findings that dividend payout, earning per share, signalling and risk positively and significantly influence the firm’s value. Moreover, companies should consider dividend policy in order to make the financial decision more efficiently. This study tells us that decisions about dividend policy should be made by considering other variables. The study has both practical and theoretical implication for top management in order to consider the dividend policy and its impact on firm performance.

Suggested Citation

  • Shankar Kumar Singh Jha & Usama Aziz, 2019. "Analysis of the Interaction between Dividend Policy and Firm Performance in Manufacturing Sector," Information Management and Business Review, AMH International, vol. 10(4), pages 14-21.
    • Handle: RePEc:rnd:arimbr:v:10:y:2019:i:4:p:14-21
    DOI: 10.22610/imbr.v10i4.2643
    as

    Download full text from publisher

    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/2643/1770
    Download Restriction: no
    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/2643
    Download Restriction: no
    File URL: https://libkey.io/10.22610/imbr.v10i4.2643?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Espen Eckbo, B. & Verma, Savita, 1994. "Managerial shareownership, voting power, and cash dividend policy," Journal of Corporate Finance, Elsevier, vol. 1(1), pages 33-62, March.
    2. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    3. Andrea Gamba & Alexander Triantis, 2008. "The Value of Financial Flexibility," Journal of Finance, American Finance Association, vol. 63(5), pages 2263-2296, October.
    4. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    5. Husam‐Aldin Nizar Al‐Malkawi, 2007. "Determinants of Corporate Dividend Policy in Jordan: An Application of the Tobit Model," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 23(2), pages 44-70, December.
    6. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    7. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    8. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    9. Darush Yazdanfar & Peter Öhman, 2015. "Debt financing and firm performance: an empirical study based on Swedish data," Journal of Risk Finance, Emerald Group Publishing, vol. 16(1), pages 102-118, January.
    10. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    11. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    12. Miller, Merton H & Rock, Kevin, 1985. "Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-1051, September.
    13. Pornsit Jiraporn & Jang‐Chul Kim & Young Sang Kim, 2011. "Dividend Payouts and Corporate Governance Quality: An Empirical Investigation," The Financial Review, Eastern Finance Association, vol. 46(2), pages 251-279, May.
    14. Hunjra, Ahmed Imran & Bilal, Muhammad & Shafi, Haroon & Ullah, Ikram & Rehman, Kashif-Ur-, 2010. "Patterns of capital structure and dividend policy in Pakistani corporate sector and their impact on organization performance," MPRA Paper 40658, University Library of Munich, Germany.
    15. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    2. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.
    3. Sunaina Kanojia & Bunny Singh Bhatia, 2022. "Corporate governance and dividend policy of the US and Indian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1339-1373, December.
    4. Renneboog, L.D.R. & Trojanowski, G., 2005. "Patterns in Payout Policy and Payout Channel Choice of UK Firms in the 1990s," Discussion Paper 2005-002, Tilburg University, Tilburg Law and Economic Center.
    5. Mehmet Levent Erdaş & Emel Bachá Sımoes, 2020. "The Relationship between Audit Mechanisms and Dividend Payout Policy within the Framework of Corporate Governance: The Case of Turkey," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 62(62), pages 255-284, December.
    6. Pablo de Andres Alonso & Felix J. Lopez Iturriaga & Juan A. Rodriguez Sanz, 2005. "Financial decisions and growth opportunities: a Spanish firm's panel data analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 15(6), pages 391-407.
    7. James, Hui & Benson, Bradley W. & Wu, Chen (Ken), 2017. "Does CEO ownership affect payout policy? Evidence from using CEO scaled wealth-performance sensitivity," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 328-345.
    8. Mehmet Levent Erdaş & Emel Bachá Sımoes, 2020. "The Relationship between Audit Mechanisms and Dividend Payout Policy within the Framework of Corporate Governance: The Case of Turkey," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 62(0), pages 255-284, December.
    9. Fairchild, Richard & Guney, Yilmaz & Thanatawee, Yordying, 2014. "Corporate dividend policy in Thailand: Theory and evidence," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 129-151.
    10. Manish Gupta, 2011. "Dividends and Cost of Capital - An Empirical Study on REITs," ERES eres2011_56, European Real Estate Society (ERES).
    11. Huang-Meier, Winifred & Freeman, Mark C., 2015. "Aggregate dividends and consumption smoothing," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 324-335.
    12. Maria Elisabete Duante Neves, 2017. "Payout and Firm's Catering," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 104-132.
    13. Francis, Bill B. & Samuel, Gilna & Wu, Qiang, 2023. "The impact of short selling on dividend smoothing," Journal of Financial Stability, Elsevier, vol. 65(C).
    14. Paulo, Alves, 2018. "Abnormal retained earnings around the world," Journal of Multinational Financial Management, Elsevier, vol. 46(C), pages 63-74.
    15. repec:ers:journl:v:v:y:2017:i:4:p:104-132 is not listed on IDEAS
    16. Trojanowski, G., 2004. "Ownership structure as a mechanism of corporate governance," Other publications TiSEM 5dbc874d-d1d0-44a5-9717-8, Tilburg University, School of Economics and Management.
    17. Iwaki, Hiromichi & Saito, Junyu, 2022. "Does rollover risk matter to payout policies? Evidence from Japanese listed firms," Journal of Economics and Business, Elsevier, vol. 120(C).
    18. Anton Miglo, 2020. "Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations," JRFM, MDPI, vol. 13(12), pages 1-25, November.
    19. Benjamin Avanzi & Vincent Tu & Bernard Wong, 2016. "A Note on Realistic Dividends in Actuarial Surplus Models," Risks, MDPI, vol. 4(4), pages 1-9, October.
    20. Céline Du Boys, 2006. "Pay out policy decisions in France A managerial perspective," Post-Print hal-02057673, HAL.
    21. Deng, Xiaotong & De Groote, Sander & Kevin Li, Chao, 2024. "Dividend signalling and investor protection: An international comparison," Journal of Contemporary Accounting and Economics, Elsevier, vol. 20(3).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnd:arimbr:v:10:y:2019:i:4:p:14-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Muhammad Tayyab (email available below). General contact details of provider: https://ojs.amhinternational.com/index.php/imbr .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.