Revisiting the Determinants of Dividend Payout Ratios in Ghana

Abstract

Comprehensive digestion of the subject matter of dividend policy has been somewhat difficult notwithstanding the many studies done on the subject as stated by Black (1976) who wrote that ‘‘. . . the harder we look at the dividend picture, the more it seems like a puzzle, with pieces that just don’t fit together’’. The situation is not much different today, where Brealey and Myers (2003) list dividends as one of the ten important unresolved problems in finance. This paper re-examines the factors that determine dividend payout in Ghana. The sample for the study was drawn from 30 listed firms on the Ghana stock exchange from 2000 to 2009.The study used ordinary least squares panel regression model to estimate the determinants of dividend payout. The results show that, profitability, the square of profitability, board size, board independence, leverage, and audit type are important determinants of dividend payout in Ghana. The results of this study are also consistent with the signaling theory, agency theory and the tax-effect hypothesis.