Factors Influencing Dividend Payment Decisions: A Case of Mutual Funds in Tanzania

Abstract

The study aimed at investigating the factors influencing dividend payout decisions of mutual funds in Tanzania for panel data in the time interval of 2019 to 2022. Using the modified Lintner model as a theoretical framework, explanatory research design was used. Employment of explanatory variables including past dividend, free cash flow, liquidity, sales growth, return on assets, financial leverage, firm size and market risk and using descriptive and inferential statistical tools i.e. correlation, fixed effect and random effect regression models the facts were realized. The results of analysis found that dividend payout decision is positively and significantly affected by past dividend and return on assets. Also it was revealed that free cash flows, liquidity, sales growth, financial leverage , firm size had a positive and insignificant effects on dividend payout decision. Either market risks revealed to have negative and insignificant influence on dividend payout. These results therefore recommend that mutual funds management should make much concentration on paying for floating dividend. Furthermore, the findings remind mutual funds management to ensure firm makes profit for firm realize performance, cash inflows, liquidity and growth. Satisfactory payment of dividend ensures for a firm value increase, firm growth and investors prosperous measured in terms of increase in financial leverage. Increase in financial leverage is the firms’ management performance which expects to help hedge the market risks for market efficiency hypothesis being realized important for perpetual future dividend payment.