The impact of board of directors’ characteristics on dividend policy: Evidence from a developing country

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Abstract

The “dividend puzzle” has been an unresolved problem since the 1950s. The purpose of this paper is to investigate the nature and a level of the relationship between board characteristics and dividend policy. The study used a positivistic approach and Spearman correlation metric, descriptive statistics, and binary regression models have been deployed as analytical tools. It is found that food and beverages sector had the highest percentage for dividend payout from 2015 to 2019. The highest percentage for women on boards was 13% in the land and property sector. The average board size for the selected companies was 8. The likelihood to pay dividends, women on boards, the board size, and CEO duality indicated a significant positive relationship. Panel regression results indicate that there is no significant relationship between board characteristics and the level of dividend payment for the selected sample. But in a sectorial analysis audit committee size has a significant negative relationship with the level of dividend payment in the manufacturing sector whereas board gender diversity has a significant positive relationship with the same in the food and beverage sector. In summary, dividend decision has been affected by several board characteristics, but such factors had no significant impact on the level of dividends declared in the market. The sectorial analysis revealed that several characteristics affected the level of dividends in two sectors.

Keywords: Corporate Governance, Board Characteristics, Dividend Policy, Spearman Correlation, Binary Logistic Regression, Panel Regression

Authors’ individual contribution: Conceptualization — D.M.K.T.D.; Methodology — D.M.K.T.D.; Validation — D.B.P.H.D.; Formal Analysis — D.M.K.T.D.; Investigation — D.M.K.T.D.; Resources — D.M.K.T.D.; Data Curation — D.M.K.T.D.; Writing — Original Draft — D.M.K.T.D.; Writing — Review & Editing — D.M.K.T.D.; Supervision — D.B.P.H.D.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34, G35, C33, L20, Y1

Received: 31.10.2020
Accepted: 19.05.2021
Published online: 21.05.2021

How to cite this paper: Dissanayake, D. M. K. T., & Dissabandara, D. B. P. H. (2021). The impact of board of directors’ characteristics on dividend policy: Evidence from a developing country. Corporate Governance and Sustainability Review, 5(2), 44-56. https://doi.org/10.22495/cgsrv5i2p4