Abstract
The dividend is the reward of shareholders of an organization in exchange for time and risk. For maximizing shareholder’s wealth, optimum dividend payout ratio is essential. The prime objective of this paper is to identify impulse of dividend payment decision of listed pharmaceutical companies in Dhaka Stock Exchange of Bangladesh. Dividend payment decision is the dependent variable and profitability, firm’s size, financial leverage, growth, and agency costs are taken as explanatory variables in this study. Collected secondary data are analyzed by econometrics software Eviews 8 through least square method. Formulated multiple regression models show value of R-square (R2) is 0.604817. R-square (R2) value indicates explanatory variables explain 60.48% variation of the dependent variable. The study also reveals that profitability and agency cost positively influence the dividend payment decision and firm’s size, financial leverage, growth negatively impact on the dividend payment decision of selected pharmaceutical companies. Among explanatory variables, profitability is not statistically significant at 5% significant level whereas firm’s size, financial leverage, growth and agency cost are found statistically significant at 5% significant level. So this paper finds that listed pharmaceutical companies in Dhaka Stock Exchange must consider firm’s size, financial leverage, growth and agency cost in their dividend payment decision.
Highlights
Corporate finance is a vast area of study where a financial manager has to take three major business decisions of an organization like financing decision, investment decision, and dividend decision
Whereas return on asset is considered as a proxy of profitability, log asset is taken as a proxy of firm’s size; debt financing is the proxy of financial leverage, annual sales growth is the proxy of firm's growth and administrative & selling expense is the proxy of agency cost
The prime concern of this research paper is to find out the impulse of dividend payment decision of listed pharmaceutical companies in Dhaka stock exchange that occupy more than 60% of the total market share of the pharmaceutical industries in Bangladesh
Summary
Corporate finance is a vast area of study where a financial manager has to take three major business decisions of an organization like financing decision, investment decision, and dividend decision. Successful Corporation generates net income or profit after deducting all kinds of expenses. The goal of dividend policy is to satisfy the shareholders by maximizing their market value of an investment in the firm (Arnold 2008). A financial executive has to take dividend decision prudently for minimizing corporation’s upcoming expenses that will improve business performance and thereby ensure wealth maximization of shareholders. Dividend decision becomes corporate debate issue after giving presentation of a seminar paper by Miller and Modigliani in 1961. In this article, they represent that firm’s value does not rely on dividend decision in a perfect capital market. In Bangladesh manufacturing sector comprises many industries like cement industry, steel industry, garment industry, food & beverage industry, the pharmaceutical industry, ceramic
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