Factors Affecting Pay-out Policy: A Panel Data Study on Selected Bangladeshi Companies

Abstract

Considering dividend payout as one of the most major financial decisions that the firms need to make to reward the stakeholders and optimizing the value of the firm, the paper aims to identify the factors affecting the dividend payment decision in a particular year by constructing two empirical models. Estimation results using an unbalanced panel data of 196 companies from 17 sectors over the period 2003-2015 listed in Chittagong Stock Exchange, Bangladesh, reveal that previous year’s dividend and current EPS and age of the firm positively affects the decision to pay or not to pay dividends; while high public ownership negatively affects the payment decision of dividends. On the other hand, only amount of dividends paid last year and current year’s EPS are found to have positive and significant effect on dividend per share paid this year. The dividend payment policy is found to vary across different sectors and time periods. The paper establishes a new baseline from which further statistically rigorous studies can be undertaken to formulate and implement policies for a growing market with untapped growth potential.