Dividend Payout and Performance of Quoted Manufacturing Firms in Ghana

Abstract

Purpose - This study sought to ascertain the impact of dividend payout on the financial performance of manufacturing firms which trade on the Ghana Stock Exchange. Panel data extracted from audited financial statements of sampled firms from 2004 to 2011 financial years were analysed within the framework of the fixed effects model after carrying out Hausman specification test. The descriptive statistics show that the average dividend payout is 32.93% while the mean performance (return on assets) is 1.08% during the study period. The regression results reveal that dividend payout significantly but negatively impacts on quoted manufacturing firms’ financial performance in Ghana. For the control variables, size and leverage were inversely related to performance whiles sales growth positively correlated with performance. Except size, all the control variables were found to be statistically significant. Intuitively, quoted manufacturing firms in Ghana which are interested in accentuating their return on assets may have to rationalize the quantum of dividend payout. This will help them accumulate high retained earnings to buttress investment in positive net present value projects which will fuel sales growth and thereby lessen their dependence on expensive debt finance in Ghana.

Keywords: Dividend payout, performance, manufacturing firms, Ghana