Dividend Policy Determinants: Evidence from the Dar es Salaam Stock Exchange Listed Firms

  • Shaban Ngole* Department of Accounting and Finance, Institute of Finance Management, Tanzania: ngole@ifm.ac.tz or n.gole@hotmail.co.uk


This article examines the determinants of dividend policy of listed companies at the Dar es Salaam Stock Exchange (DSE). The study employs primary data and uses a questionnaire as a data collection tool, and involves fifteen companies listed at the DSE as of December, 2014. It complements the data by using data collected from students of Masters of Finance and Investment (MFI) at the Institute of Finance Management for academic year 2013/2014, which were collected between July and December, 2014. The study finds the following factors as key drivers of dividend policy at DSE: profit margins, expected future earnings, dividends growth, future investment programmes and stability of earnings.
Generally the findings support the dividend relevance theory and its accompanying arguments and theories (e.g., residual dividend theory and clientele theory). The findings have policy implications to regulators, stock market (DSE) and companies, especially when formulating regulations on dividend policy. Future research may need to empirically test the identified determinants of dividend policy using regression analyses. Also, it is worthwhile to examine the drivers of dividend policy based on industries or regulation, i.e., regulated versus unregulated industries.

Keywords: dividend policy, dividend policy determinants, DSE


Allen, F. & R. Michaely, (1995), “Dividend Policy,” cited in R.A Jarrow, V. Makosimovic and W.T. Ziemba (eds.), Handbooks in Operations Research and Management Sciences: Finance, New York: Elsevier.

Al-yahyaee. K. A, T. Pham & T. Walter. (2006). Dividend Policy in Absence of Taxes, School of Banking and Finance, University of New South Wales, December, Working paper.

Arnold, G. (2005), Corporate Financial Management, 3rd edition, Great Britain: Pearson Education.

Baker, K.H., G.E. Farrelly & R.B. Edelman (1988), “Dividend Achievers: A Behavioural Perspective,” Akron Business and Economic Review,
Spring, 19(1): 79–92.

Baker, K., H. Gail E. Farrelly & R. B. Edelman, (1985), "A Survey of Management Views on Dividend Policy," Financial Management, 14(3):

Baker, K.H., E. T. Veit & G. Powell, (2001), "Factors Influencing Dividend Policy Decisions of Nasdaq Firms,” Financial Review, 36(3): 19–38.

Bhattacharyya, N. (2007), "Dividend Policy: A Review,” I.H. Asper School of Business, University of Manitoba, Winnipeg, Canada. MF, 33, 1.

Black, F., (1976), “The Dividend Puzzle,” Journal of Portfolio Management, 2, Special issue, 5–8.

Bova, F. (2009), “The Determinants and Consequences of Higher IFRS Compliance Following Mandatory IFRS Adoption in Weak Regulatory Regimes,” Working Paper Series, Rotman School of Management, niversity of Toronto.

Brealey, R.A. & S. C. Myers (2002). Principles of Corporate Finance, Boston, MA: Irwin/ McGraw- Hill.

Brennan, M, (1970), “Taxes, Market Valuation and Corporate Financial Policy,” National Tax Journal, 23(4): 417, December.

Dividend Policy: The Evidence from New Zealand,” International Research Journal of Finance and Economics, Issue 34: 18–28.

Dobbins, S. R. & S. F. Witt, (1988), Practical Financial Management, UK: Basil Blackwell Ltd.

Dar es Salaam Stock Exchange (DSE), (2015), Dar es Salaam Stock Exchange, A Hand Book, available at ttp://www.dse.co.tz/sites/default/files/ HANDBOOK%20DSE%20-%March-2015-%20 English.pdf [Accessed on 28th April, 2015 at 1615 HRS]

Edelman, B., M. Ostrovsky & M. Schwarz, (1983), “Dividend Policy, cited in Ward (1994:181),” Strategic Issues in Finance, Great Britain: Butterworth-Heinemann Ltd.

Fama, E.F. & M.H. Miller, (1972), The Theory of Finance, New York: Holt, Rinehart and Winston.

Gordon, M, (1959), “Dividends, Earnings and Stock Prices,” The Review of Economics and Statistics, May, 41(2): 99–105.

Graham, B., D. Dood & S. Cottle, (1962), “Security Analysis: Principles and Techniques,” cited in Dobbin and Witt (1988: 115), Practical Financial Management, UK: Basil Blackwell Ltd.

Gray, S.J., (1988), “Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally,” Abacus, 24(1): 1–15.

Hillier, D., A. Hodgson & S. Ngole, (2015), “IFRS and Secrecy: Assessing Accounting Value Relevance Across Africa,” Journal of International
Financial Management and Accounting, Forthcoming.

Kask, C.J. & M. Schyllert, (2005), “Key Drivers for Dividends, An Empirical Study for A-Listed Swedish Companies,” Master thesis, Department
of Business Administration, Lund School of Economics and Management, March.

Keane, S., (1986), “Dividend Policy” in M. Firth & S. Keane (eds.). Issues in Finance, Philip Allan.

Khan, K. I., M. Aamir, A. Qayyum, A. Nasir & M.I. Khan, (2011), “Can Dividend Decisions Affect the Stock Prices: A Case of Dividend Paying Companies of KSE,” International Journal of Finance and Economics, Issue (76).

Lintner, J., (1956), “Distribution of Incomes and Corporations Among Dividends Retained Earnings and Taxes,” American Economic Association, 46, 97–113, May.

Lotto, J., (2014). “Corporate Ownership Concentration and Firm Performance in Tanzanian Listed Firms,” in G.D. Mjema & G.E. Kaganda (eds.). Socio-Economic Development in Tanzania: A Multidisciplinary Perspective, Dar es Salaam: Dar es Salaam University Press.

Majluf, N. & S.C. Myers, (1984), “Corporate Financing and Investment Decisions When Firms have Information that Investors Do Not Have,”
Journal of Financial Economics, 13: 187–221.

Michaely, R. & M.R. Roberts, (2006), “The Dividend Policies of Private Firms: Insights into Smoothing, Agency Costs, and Information
Asymmetry,” Working Paper Series, The Wharton School, University of Pennsylvania

Miller, M. & M. Scholes, (1978), Dividends and Taxes, Journal of Financial Economics, 6: 333–364.

Miller, M. & F. Modigliani, (1961), Dividend Policy, Growth and the Valuation of Shares, Journal of Business, 34(4): 411–433, October

Ngole, S., (2007), “Dividend Policy of Tanzania Listed Companies,” Masters Dissertation, Birmingham City University.

Nnadi, M., N. Wogboroma & B. Kabel, (2013), “Determinants of Dividend Policy: Evidence from Listed Firms in the African Stock Exchanges,” Panoeconomicus, 6: 725–741.

Shefrin, H. & M. Statman, (1984), “Modern Corporate Finance: A Multi-disciplinary Approach to Value Creation,” cited in A.C. Shapiro and S.D.
Balbirer, (2000: 521), USA, Prentice Hall.

Soter, D., E. Brigham & P. vanson, (1996), “The Dividend Cut ‘Heard Round the World’ - The Case of FPL,” Journal of Applied Corporate
Finance, Morgan Stanley analyst report, 9(1): 4–
16, Spring, June.
How to Cite
NGOLE*, Shaban. Dividend Policy Determinants: Evidence from the Dar es Salaam Stock Exchange Listed Firms. The African Journal of Finance and Management, [S.l.], v. 24, n. 1 & 2, mar. 2017. ISSN 0856-6372. Available at: <http://journal.ifm.ac.tz/index.php/AJFM/article/view/351>. Date accessed: 26 sep. 2017.
African Journal of Finance and Management