Dividend policy and performance of listed firms on Ghana stock exchange
We examined the dividend policy and financial performance nexus among listed firms in Ghana, having controlled for firm age, size, capital structure, governance, and financial sector clean-up. We employed the system dynamic general method of moments (GMM) estimation technique with data from 2015 to...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2127220 |
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| author | Ahmed Bossman Samuel Kwaku Agyei Oliver Asiamah Ellen Animah Agyei Emmanuel Yaw Arhin Edward Marfo-Yiadom |
| author_facet | Ahmed Bossman Samuel Kwaku Agyei Oliver Asiamah Ellen Animah Agyei Emmanuel Yaw Arhin Edward Marfo-Yiadom |
| author_sort | Ahmed Bossman |
| collection | DOAJ |
| description | We examined the dividend policy and financial performance nexus among listed firms in Ghana, having controlled for firm age, size, capital structure, governance, and financial sector clean-up. We employed the system dynamic general method of moments (GMM) estimation technique with data from 2015 to 2019. In addition to dividend payout, new proxies of dividend policy (dividend capacity and free cash flow savings) were employed to ascertain their impact on firm performance in a period filled with financial sector reforms and clean-ups. We found a significant effect of dividend capacity on Return on Assets and Return on Equity. Free cash flow savings was found to have a direct and significant effect on Return on Assets and Return on Equity but an indirect relationship with both Tobin’s Q and stock price. Our findings indicate that while dividend capacity and free cash flow savings are positively connected with firm performance, dividend payout detrimentally affects owners’ wealth during crisis periods. The findings divulged a detrimental effect of financial sector clean-ups on the performance of non-financial firms only. It is recommended that corporations maintain a balance between dividend payout and free cash flow savings to attract all classes of investors. Governments and market regulators alike must take practical steps to roll out policies on financial sector reforms and/or clean-ups to mitigate the detrimental impacts of inadvertent reforms and/or clean-ups on other sectors of the economy. Investors, market regulators, and governments seek to benefit from the findings of our study. |
| format | Article |
| id | doaj-art-92758ff1efcb4f1eaeb93aae2006fa8d |
| institution | DOAJ |
| issn | 2332-2039 |
| language | English |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-92758ff1efcb4f1eaeb93aae2006fa8d2025-08-20T03:12:43ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2127220Dividend policy and performance of listed firms on Ghana stock exchangeAhmed Bossman0Samuel Kwaku Agyei1Oliver Asiamah2Ellen Animah Agyei3Emmanuel Yaw Arhin4Edward Marfo-Yiadom5Department of Finance, School of Business, University of Cape Coast, Cape Coast, GhanaDepartment of Finance, School of Business, University of Cape Coast, Cape Coast, GhanaDepartment of Finance, School of Business, University of Cape Coast, Cape Coast, GhanaDepartment of Business and Social Science Education, College of Education, University of Cape Coast, Cape Coast, GhanaDepartment of Accounting, School of Business, University of Cape Coast, Cape Coast, GhanaDepartment of Accounting, School of Business, University of Cape Coast, Cape Coast, GhanaWe examined the dividend policy and financial performance nexus among listed firms in Ghana, having controlled for firm age, size, capital structure, governance, and financial sector clean-up. We employed the system dynamic general method of moments (GMM) estimation technique with data from 2015 to 2019. In addition to dividend payout, new proxies of dividend policy (dividend capacity and free cash flow savings) were employed to ascertain their impact on firm performance in a period filled with financial sector reforms and clean-ups. We found a significant effect of dividend capacity on Return on Assets and Return on Equity. Free cash flow savings was found to have a direct and significant effect on Return on Assets and Return on Equity but an indirect relationship with both Tobin’s Q and stock price. Our findings indicate that while dividend capacity and free cash flow savings are positively connected with firm performance, dividend payout detrimentally affects owners’ wealth during crisis periods. The findings divulged a detrimental effect of financial sector clean-ups on the performance of non-financial firms only. It is recommended that corporations maintain a balance between dividend payout and free cash flow savings to attract all classes of investors. Governments and market regulators alike must take practical steps to roll out policies on financial sector reforms and/or clean-ups to mitigate the detrimental impacts of inadvertent reforms and/or clean-ups on other sectors of the economy. Investors, market regulators, and governments seek to benefit from the findings of our study.https://www.tandfonline.com/doi/10.1080/23322039.2022.2127220dividend policyfree cash flowfirm valuefirm performancefinancial sector clean-upGhana stock exchange |
| spellingShingle | Ahmed Bossman Samuel Kwaku Agyei Oliver Asiamah Ellen Animah Agyei Emmanuel Yaw Arhin Edward Marfo-Yiadom Dividend policy and performance of listed firms on Ghana stock exchange Cogent Economics & Finance dividend policy free cash flow firm value firm performance financial sector clean-up Ghana stock exchange |
| title | Dividend policy and performance of listed firms on Ghana stock exchange |
| title_full | Dividend policy and performance of listed firms on Ghana stock exchange |
| title_fullStr | Dividend policy and performance of listed firms on Ghana stock exchange |
| title_full_unstemmed | Dividend policy and performance of listed firms on Ghana stock exchange |
| title_short | Dividend policy and performance of listed firms on Ghana stock exchange |
| title_sort | dividend policy and performance of listed firms on ghana stock exchange |
| topic | dividend policy free cash flow firm value firm performance financial sector clean-up Ghana stock exchange |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2127220 |
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