Impact of Dividend Decisions on Financial Performance of Listed Financial Sector Companies in Sri Lanka
Abstract
Sri Lankan economy faced extremely challenging conditions during the period of 2015-2019 where the GDP growth remained below average whilst financial sector performance also had weakened raising concerns. Hence, this study revolves around investigating the effects of dividend decisions on the financial performance of listed companies in the financial sector comprising banks, finance, and insurance companies during the period of 2015-2019. Based on the literature review, Dividend Per Share and Dividend Payout were determined as the indicators for the dividend decisions whilst Return on Equity and Return on Assets were used as the indicators for the financial performance. Control variables of leverage, Firm Size, and Firm Growth Rate were also used for the panel regression analysis where 20 listed companies have been selected as the sample. Correlation analysis found a weak correlation between dividend decisions indicators and financial performance indicators while panel regression analysis revealed that only Return on Assets has a significant impact from dividend decision indicators of Dividend Per Share and Dividend Payout.
The study recommends managers of finance companies adopt a more consistent dividend policy whilst suggesting the separation of dividend type and its impact on financial performance for future studies.
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