The Impact of Dividend Policy on Company Financial Performance During the Covid 19 Pandemic : An Empirical Analysis

Abstract

Dividend policy decision is one of the most important factors of corporate policy. Stockholders and potential investors generally believe that the dividend payout decision of the companies give important clues about the firm’s financial performance and its ability to generate sufficient profit. Investors are usually ready to pay a premium for a firm that follows a stable dividend policy.The purpose of this research is to investigate whether there is positive relationship between the dividend policies and the financial performances of the selected companies included in the Borsa Istanbul (BIST) Dividend Index (XTMTU). The selected companies are those 30 companies which distributed dividends regularly between 2018 and 2022. In this study, the dividend payout ratio, which is a dependent variable, is measured by the ratio of dividends paid by a company to its earnings. Two types of ratios were selected to conduct the research: profitability ratios and liquidity ratios. The result of the analysis indiates the positive relationship between profitability ratios of Return on Equity (ROE), Return on Asset (ROA), Earnings per Share (EPS) and dividend policy. On the other hand, a statistically significant relationship between the liquidity ratios of current ratio, cash ratio and net working capital ratio and dividend policy could not be determined.

Keywords : Borsa Istanbul Dividend Index, dividend policy, profitability, financial perfomance, liquidity

DOI: 10.7176/EJBM/15-6-09

Publication date:March 31^st 2023