Dividend Policy and Shareholders' Wealth of Listed Manufacturing Companies in Sri Lanka

Abstract

In finance, over the years impact of a firm’s dividend policy on shareholders’ wealth is an unresolved issue. Themain issue of debate revolves around the optimal Dividend payout which is maximizing the Shareholders’wealth of investors. The country’s manufacturing sector is enjoying a stronger pace in earnings growth post warin Sri Lanka. Therefore the necessity of manufacturing sector is realized for the country’s economicaldevelopment. This study aims to investigate the impact of dividend policy on shareholders’ wealth of listedmanufacturing companies in Sri Lanka. The common approach in empirical studies has been to examine therelationship between dividend policy and shareholders’ wealth. The sample of this study composed of twelvelisted Manufacturing companies in Sri Lanka and period of five years from 2008 to 2012. The required data andinformation for the study were gathered from published annual reports and hand book of listed companies inCSE. The correlation and regression analysis were used for data analysis. The result of this study reveals thatthere is a significant relationship between the dividend policy and shareholders’ wealth and further dividend pershare has a significant impact on shareholders’ wealth of listed manufacturing companies in Sri Lanka.Keywords: Dividend policy, Shareholders’ wealth, Dividend per share