Dividend decisions determinants in financial and non-financial institutions listed in the Dar es Salaam stock market

Abstract

The study aimed to analyze factors that influence the decision to pay dividends to financial and non-financial institutions listed in the Dar es Salaam Stock Exchange (DSE) in Tanzania. Specifically, the study: assessed the effect of profitability on dividend payout decisions among financial and non-financial firms, examined the effect of liquidity on dividend payout decisions among financial and non-financial firms; and evaluated the impact of institution size on the decision to pay dividends. The study applied a quantitative approach and used panel data from 2016 to 2022 covering nine institutions. Using a panel regression model and correlation analysis, the relationships between the determinants and dividend distribution decisions were examined. The results show that there is a positive and significant relationship between the dividend payout of financial and non-financial institutions and profitability with a coefficient correlation of 0.277 as a measure of return on equity, which is consistent with the significant regression coefficient between dividend payout and profitability. The significance and direction of this determining factor influence the decision on dividend distribution. The size and liquidity of the institution have a weak and insignificant relationship of -0.12 and 0.177 respectively with dividend distribution. The study concludes that profitability (return on equity) is among the factors to consider in the dividend distribution decisions of financial and non-financial institutions. The study recommends that investors should invest in financial and non-financial institutions that have high profitability. These institutions have great chances of paying out sufficient dividends. The study influenced DSE to follow-up on a policy that ensures dividend payout, listed firms and managers should comply by depending on the variable that generates large profit. Future research may examine the determinants of dividend payout decisions of financial and non-financial institutions listed on the Dar es Salaam Stock Exchange (DSE) in Tanzania by incorporating additional determinants, such as ownership structures, corporate governance practices, capital adequacy, and dividend policies.