The impact of financial management decisions on firm value: The moderating role of profitability

Abstract

The study was conducted to determine the moderating role of profitability on the influence of financial management decisions on firm value at the Dar es Salaam Stock Exchange (DSE). The study was guided by four specific objectives derived from two independent variables named financing decision and dividend decision, while considering profitability as the moderating variable. The study was guided by the positivism philosophy, employed a causal inference research design, and adopted a deductive approach. The study utilized quantitative secondary data spanning a ten (10) year period from 2013 to 2022, sourced from the DSE database and annual reports of specifically chosen companies. The study population comprised twenty-eight (28) listed companies, and by a sample of ten (10) non-financial firms listed at DSE was selected through the purposive sampling technique. Data analysis was carried out using E-View software version 12, and a fixed effect panel regression model was employed for the study. The study found financing decision do not influence firm’s value while dividend decision has a positive influence on firm’s value. Furthermore, Profitability has a positive moderating role on both the influence of financing decisions and dividend decisions on firm value. Based on the findings, it is recommended that listed companies to enhance their dividend policies and prioritize profitability strategies to strengthen shareholder value, while capital market authorities should encourage prudent dividend policies and promote transparency.