Nexus between financial leverage and dividend payout from manufacturing firms listed at Dar es Salaam stock exchange, Tanzania

Abstract

AbstractThe relationship between financial leverage and dividend pay-out is very crucial to support the stock market development. The most of the literatures concentrated on the relationship between equity and dividend payout. This study aims to investigate the connection between financial leverage and dividend payout among manufacturing firms listed at Dar es Salaam Stock Exchange (DSE) in Tanzania. The research employed a longitudinal research design with a quantitative approach. The study used a total of 105 firm-year observations from 7 manufacturing companies, ranging from 2006 to 2020. The research employed document review to assemble the data required for the research. The data from this study were analysed descriptively and inferentially using panel data regression. The research found that the financial leverage of manufacturing companies affected dividend pay-outs (P < 0.005). This study contributes to the stock markets literature since it describes how a company’s management should decide on dividend distribution and what considerations should be considered. This study adds significantly to current theoretical and empirical information about the drivers of dividend payout. The overall findings suggest that manufacturing industries listed at DSE are highly influenced by financial leverage. Based on research findings, it is suggested that manufacturing companies need to improve their financial leverage to increase the ratio of dividend pay-outs to attract more investments.

Keywords

• Financial leverage
• dividend payout
• manufacturing companies
• DSE
• Tanzania
• [G3; G1]