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

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  • Mutaju Marobhe

    (Tanzania Institute of Accountancy (TIA), Dar es Salaam, Tanzania
    Tanzania Institute of Accountancy (TIA), Dar es Salaam, Tanzania)

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.

Suggested Citation

  • Mutaju Marobhe, 2019. "The Nexus between Dividend Policy and Financial Gearing of Listed Non Financial Companies in Tanzania," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 5(5), pages 294-302.
    • Handle: RePEc:apa:ijbaas:2019:p:294-302
    DOI: 10.20469/ijbas.5.10004-5
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    References listed on IDEAS

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    1. Lukas Setia‐Atmaja, 2010. "Dividend and debt policies of family controlled firms," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 6(2), pages 128-142, April.
    2. Saumitra Bhaduri, 2002. "Determinants of corporate borrowing: Some evidence from the Indian corporate structure," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(2), pages 200-215, June.
    3. Risal & Kristiawati Endang, 2017. "The effect of investment decision financing decision dividend payment policy and company size," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 3(2), pages 105-113.
    4. Cooper, Ian A. & Lambertides, Neophytos, 2018. "Large dividend increases and leverage," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 17-33.
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