The Nexus between Dividend Policy and Financial Gearing of Listed Non Financial Companies in Tanzania

Mutaju Marobhe
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Mutaju Marobhe: Tanzania Institute of Accountancy (TIA), Dar es Salaam, Tanzania

International Journal of Business and Administrative Studies, 2019, vol. 5, issue 5, 294-302

Abstract: This paper intends to explore the relationship between dividend policy and financial gearing of listed non financial companies in Tanzania. A case study of seven (7) non financial companies listed at Dar es Salaam Stock Exchange (DSE) was used to assess this phenomenon. Unbalanced panel data from these companies’ annual reports were used covering a period from 2002 to 2018. Generalized linear regression analysis was used to examine the aforementioned phenomenon with Akaike Information Criterion (AIC) as well as Beysian Information Criterion (BIC) being used to select the most appropriate models. The results from generalized linear regression analysis indicated that companies with higher dividend payouts have lower gearing. Further results portray that higher dividend payouts are associated with lower cost of debts as debt providers deem these companies to be stable hence less risky. So this study urges profitable firms to pay out dividends as a sign of financial strength which eventually reduces cost of debt. But caution must be taken by financial managers to ensure that sufficient amount of internal funds are retained after paying dividends for future endeavors.

Keywords: Dividend policy; financial gearing; DSE; generalized linear regression (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:apa:ijbaas:2019:p:294-302

DOI: 10.20469/ijbas.5.10004-5

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