THE IMPACT OF DIVIDEND POLICY ON SHARE PRICES: EVIDENCE FROM THE GHANA STOCK EXCHANGE.

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Date
July, 2015
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Abstract
This study seeks to examine the impact of dividend policy on share prices of listed companies in Ghana. The analyses are performed using data derived from the financial statements of 20 listed companies on the Ghana stock Exchange (GSE) over a ten-year period from 2004 to 2013. A pooled panel regression model is used to estimate the regression equation. The results show that both dividend payout ratio and dividend yield have positive and significant impact on share prices. The results further show that market capitalization, profit after tax and return on equity have significant effect on share prices of the listed firms. However, long term debt shows insignificant effect on share prices. The study, therefore, concludes that dividend policy is relevant in the valuation of a company‟s share price. The study recommends, among other things, that Ghanaian firms should adopt an optimal trade-off policy between dividend payment and retained earnings that would increase the shareholders‟ wealth through share price appreciation and investors seeking to invest in Ghanaian listed firms should consider their dividend policies before making investment decisions. The study also recommends that future studies should examine the relationship between dividend policy and share prices using data from specific industries, for example, manufacturing, financial, trading, mining and so on to determine whether variations exist among different sectors of the economy as far as dividend policy is concerned.
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A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Banking and Finance Option)
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