Dividend policy determinants: evidence from the Dar es Salaam Stock Exchange listed firms

Abstract

This article examines the determinants of dividend policy of listed companies at the Dar es Salaam Stock Exchange (DSE). The study employs primary data and uses a questionnaire as a data collection tool, and involves fifteen companies listed at the DSE as of December, 2014. It complements the data by using data collected from students of Masters of Finance and Investment (MFI) at the Institute of Finance Management for academic year 2013/2014, which were collected between July and December, 2014. The study finds the following factors as key drivers of dividend policy at DSE: profit margins, expected future earnings, dividends growth, future investment programmes and stability of earnings. Generally the findings support the dividend relevance theory and its accompanying arguments and theories (e.g., residual dividend theory and clientele theory). The findings have policy implications to regulators, stock market (DSE) and companies, especially when formulating regulations on dividend policy. Future research may need to empirically test the identified determinants of dividend policy using regression analyses. Also, it is worthwhile to examine the drivers of dividend policy based on industries or regulation, i.e., regulated versus unregulated industries.

Keywords: dividend policy, dividend policy determinants, DSE