Global Review of Accounting and Finance
Vol. 8. No. 2., September 2017, Pages: 83 – 99
Dividend Policy of Listed Companies: The Case of Chittagong Stock Exchange
The article examines the impact of six factors, i.e., company market value; investment decision; finance decision; signal theory; agency theory; and shareholder structure on dividend policy of a company. 57 companies have been approached among which 55 responded and filled out the questionnaires, out of which two were deemed unusable. The questionnaire was designed to identify the importance of six different factors that the management considers while setting the dividend policy of the company. The analysis highlighted the importance according to the economic sector as well. 18 questions were asked which focused on company value, investment decision, financing decision, signalling theory, agency theory, and shareholder’s structure. Rotating Factor analysis is used for getting the rank order of the generated factors. The study has identified that company value is the most important factor, followed closely by shareholder’s structure when confirming the dividend policy of the firm. The rest of the factors in order of importance are signalling theory, investment decision, finance decision, and agency theory. The financial position and future cash need of the Board of Directors and their wealth have a significant role in dividend decision-making. In Bangladesh, pay out culture is dominated by a particular majority shareholder’s group interest. Questionnaire is used to analyse the dividend policy factors in a developing country setting, which can be applied to assess the performance of markets across multiple developing countries.