Impact of dividend policy on the financial performance of economic institutions listed on the Amman financial market

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Abstract

The current study aims to test the impact of dividend policy on the financial performance of the economic institutions that trade on the Amman financial market. The analysis utilized a sample of 37 economic institutions over the period of 2018–2021 and was based on panel data and a fixed effects model. The results demonstrated that cash dividends and dividends per share (DPS) had a negative, and statistically significant, effect on the return on total assets (ROA) of the economic institutions listed on the Amman financial market; conversely, retained earnings had a positive, and statistically significant, effect on the ROA of the economic institutions listed on the Amman financial market. Furthermore, the analysis also indicated that the economic institution’s financial leverage diminished the institution’s ROA. The most important recommendation generated from these hypotheses is that economic institutions should follow a retained earnings policy, which allows for greater value to be created for the institution and subsequently creates increased opportunities for future investments, hence leading to an improved financial performance. In conclusion, the study offers the first early-stage investigative and structured analysis of dividend policy impact on the financial performance of the economic institutions listed on the Amman financial market.

Keywords: Dividend Distribution Policy, Financial Performance, Panel Data, Amman Financial Market

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: C33, G15, G32, G35

Received: 10.10.2024
Revised: 07.01.2025; 24.03.2025; 27.06.2025
Accepted: 18.07.2025
Published online: 22.07.2025

How to cite this paper: Al-Oshaibat, S. D. (2025). Impact of dividend policy on the financial performance of economic institutions listed on the Amman financial market. Risk Governance & Control: Financial Markets & Institutions, 15(3), 84–93. https://doi.org/10.22495/rgcv15i3p6