Dividend Payout and Firm Performance: Evidence from a Frontier Market

Abstract

This study attempts to identify the impact of dividend payout on the market and financial performances of listed entities in Colombo Stock Exchange (CSE). We selected 25 listed entities for this study for 06 years from the year 2014 to 2019. Dividend payout used as a key independent variable while Earning volatility, Net working capital, Capital structure and firm size considered as control variables. Stock return and Market Value Added (MVA) are used as the proxies for firm’s market performance while return on equity, return on Assets and Economic Value Added (EVA) are used as proxies for financial performance. In terms of analysis, panel regression was applied in order to identify whether there is an impact of dividend payout on firm financial and market performance. The findings revealed that there is a significant positive influence of dividend payout on firm stock return, return on equity, return on assets and EVA. Our findings become original as the first study to employ market performance indicators in this phenomenon. Henceforth, these findings are valuable for the policy makers specially for corporate managers and investors for their decision making.