Financial performance, firm specific factors and dividend policies: a case of firms listed on Uganda securities exchange

Abstract

The purpose of this study is to investigate the impact of firm financial performance and firm specific factors to dividend policy on companies listed on the Uganda Securities Exchange from 2017 to 2021. The study was guided by two objectives; to establish the relationship between financial performance and dividend policies and to evaluate the moderating role of the firm specific factors on the relationship between financial performance and dividend policies. Purposive sampling was utilized, and there are 16 companies represented in the sample. Purposive sampling was used to pick the samples, and those that satisfied the requirements were sixteen firms that were consistently featured in USE (not delisted and relisted) between 2017 and 2021. Profitability, Liquidity, and Leverage were used as proxies for financial performance. Likewise, the Dividend Payout Ratio and Dividend Yield served as a proxies for dividend policy. In this quantitative research, the panel data regression approach was applied and the formulated hypotheses were tested using t-statistics in order to evaluate partial regression coefficients. F-statistics were also analyzed in order to examine feasibility of research models with a level of significance of 5%. A classical assumption test, which contains the normality test, multi-collinearity test, heteroscedasticity test, and autocorrelation test, was conducted. The analysis results reveal that the Profitability has significant influence on dividend policy ratios whereas financial leverage and liquidity have a positive but non-significant influence on dividend policy. Additionally, firm specific factors were found to have a significant moderating effect between financial performance and dividend policy. These results suggest that the company's liquidity position and leverage are not taken into consideration when deciding how much dividends to distribute to investors or when establishing the dividend policy