Determinants of Dividend Policy in the Financial Sector in Sri Lanka: A GMM Approach
VUCA and Other Analytics in Business Resilience, Part B
ISBN: 978-1-83753-199-8, eISBN: 978-1-83753-198-1
Publication date: 13 May 2024
Abstract
Introduction: Why companies pay dividends and the determinants of dividend policy are considered an unresolved dividend puzzle. To reach a consensus over the puzzle, researchers must investigate the factors affecting dividend policy by incorporating all the determinants into a single research effort.
Purpose: We examine the dividend policy determinants of Sri Lankan firms, explicitly focusing on the banking, finance, and insurance (BFI) sectors.
Methodology: This study uses the quantitative approach applying the Generalized Method of Moments (GMM) system to examine the dividend policy determinants by obtaining secondary data from 51 listed BFI organisations in Sri Lanka.
Findings: The analysis disclosed that the variables of changes in revenues, firm size, liquidity, corporate tax, business risk, and profitability have a positive relationship with dividend yield, whereas investment opportunities, leverage, change in revenues, corporate tax, and firm size impact positively on the propensity to pay dividends in BFI organisations in Sri Lanka. Our findings opine that managers in the BFI industries should prioritise changing their dividend policies by paying close attention to factors, such as dividend yield, changes in revenue, firm size, liquidity, corporate tax ratio, business risk, and profitability because the dividend policy is critical to retaining current investors and luring new ones.
Keywords
Citation
Tharanga, T.M.N., Banda, Y.K.W., Dewasiri, N.J. and Peiris, T.U.I. (2024), "Determinants of Dividend Policy in the Financial Sector in Sri Lanka: A GMM Approach", Singh, D., Sood, K., Kautish, S. and Grima, S. (Ed.) VUCA and Other Analytics in Business Resilience, Part B (Emerald Studies in Finance, Insurance, and Risk Management), Emerald Publishing Limited, Leeds, pp. 55-72. https://doi.org/10.1108/978-1-83753-198-120241004
Publisher
:Emerald Publishing Limited
Copyright © 2024 Thambawita Maddumage Nimali Tharanga, Yatiwelle Koralalage Weerakoon Banda, Narayanage Jayantha Dewasiri and Thelge Ushan Indika Peiris