An empirical analysis of determinants of dividend policy in Tanzania: evidence from selected listed firms in Dar es Salaam Stock Exchange (DSE)

Abstract

It is generally accepted that dividends policy is an important and widely used tool for the distribution of the value of a company to shareholders. According to literature, dividend policy is influenced by certain determinants. However, these determinants have been a subject of debate among scholars in financial management. The objective of this study is to investigate the determinants of dividend payment policy in Tanzania. To achieve this, a total 10 listed firms in the Dar es Salaam Stock Exchange were selected and analysed using a purposive sampling technique for the period 2006-2015. The study employed both the model of panel data method and the linear multiple regression model with random effects. The findings show that profitability, firm size and liquidity are significant factors influencing the dividend policy of firms, and hence the management of listed companies in Tanzania should consider these determinants when designing their dividend policies. These findings support the profitability, signaling and agency cost theories of dividend policy.

Keywords: dividend policy, determinants, signaling theory, agency cost theory