The Impact of Corporate Governance on Dividend Policy: An Empirical Evidence from Listed Companies in Sri Lanka

Abstract

Purpose: This study aims to measure the relationship between corporate governance and dividend policy of Sri Lankan listed companies with the highest market capitalization, using the Agency theory. Methodology: The sample is based on the listed companies with the highest market capitalization at the Colombo Stock Exchange for a four-year period. The independent variables of this research include the board size, board independence, board gender diversity, board meetings, independent directors in audit committee, audit committee meetings, independent directors in remuneration committee and remuneration committee meetings. The dependent variables are dividend per share and dividend payout ratio. Descriptive analysis and Panel regression analysis were conducted to analyze the data. Findings: Independent directors in audit committee and return on assets have a significant positive impact on the dividend policy. Remuneration committee meetings have a significant negative impact on the dividend policy. However, board size, board meetings, board independence, board gender diversity, audit committee meetings, independent directors in remuneration committee, firm size and leverage have no significant impact on the dividend policy. According to the findings, corporate governance has an influence on the dividend policy of the listed companies during the period. Originality: This study fills the research gap in the local context, and this can be recommended for further research, changes in the academic concepts, and modifications in the accepted theories.