The relationship between working capital management and dividend policy: panel evidence from manufacturing companies listed at Dar es salaam stock exchange (DSE)

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Date
2017
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam,
Abstract
This study analyzed the relationship between Working Capital Management and Dividend Policy The specific objectives of this study include assessing the relationship between working capital components and dividend policy, evaluating the correlation between working capital components and dividend policy and examine the causality between working capital components and dividend policy. The secondary data for this study were collected from Tanzania Breweries Limited (TBL), East African Breweries Limited (EABL), Tanzania Cigarette Company (TCC), Tanzania Portland Cement Company (TPCC), Tanzania Oxygen Limited (ToL), and Tanzania Tea Packers (TATEPA) Limited from Dar Es Salaam Stock Exchange. The study used Stata to analyze econometric model of regression where various relationships were tested. The findings of the study reveal that both current ratio and quick ratio have a significant relationship with dividend yield moreover Pearson correlation analysis showed that current ratio, quick ratio, cash cover ratio and cash conversion cycle variables are negatively correlated to dividend policy. The only variables that showed positive relationship with dividend policy are receivables collection period and payables deferral period. It is recommended that dividend policy should be increased when liquidity of the company has also increased. Paying dividends in periods of deteriorating liquidity can have detrimental effects on the company’s operations. Companies with shortage of liquid assets should take caution when deciding on the amount of dividends to pay out to shareholders to avoid running out of cash for investment and operational issues. The study has policy implication to the managers the business entities, lenders and investors in general. For managers, the study indicates that they should design and implement efficient and effective policies for managing the working capital components as they have a positive relationship with the dividend policy of the entity. The study is also important to lenders who are supposed to extend their scope in analyzing the listed entities and understand the impact of lending to organizations whose financials depict a strong relationship between working capital and the dividend policy. The same applies to the investors who are supposed to understand the relationship between dividend policy and working capital management of the entities to which they invested their precious resources.
Description
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF LB2806.3S.T34M338)
Keywords
Financial management, Dividend, Manufacturing companies, Dar es Salaam Stock exchange
Citation
Barakael, A (2017) The relationship between working capital management and dividend policy: panel evidence from manufacturing companies listed at Dar es salaam stock exchange (DSE), Master dissertation, University of Dar es Salaam. Dar es Salaam