The Impact of Corporate Governance on Dividend Policy: Evidence from Listed Non-Financial Firms in Sri Lanka

Abstract

Abstract

This study examines the impact of corporate governance on dividend policy in non-financial firms listed on the Colombo Stock Exchange in Sri Lanka. The study uses a quantitative approach with secondary data extracted from annual reports of the top 100 listed companies spanning from 2016 to 2023. It employs a panel data regression model to analyze the impact of key corporate governance variables such as CEO duality, board size, board independence, audit committee meetings on dividend policy. The dividend policy measures through dividend payout. Control variables namely leverage and firm size are also included. The findings reveal that CEO duality and remuneration committee independent directors have a significant impact on dividend policy. Specifically, CEO duality negatively impacts dividend policy, while the presence of independent directors on the remuneration committee positively influences dividend payouts. On the other hand, factors such as board size was found to have no significant impact on dividend policy in the context of sample firms. This study concludes that effective corporate governance plays a crucial role in shaping dividend policies, with particular emphasis on CEO duality. The findings provide valuable insights for policymakers, investors, and corporate managers seeking to improve governance practices and enhance shareholder value in Sri Lankan non-financial firms.