Abstract:
Scholars have been studying dividend policy since the days of Modigliani and Miller
(1958). However, until quite recently, the idea of liquidity has rarely been mentioned.
The study examined whether there was a relationship between the firm dividend
policy and any share liquidity criteria in the Sri Lankan context. This study represents
50 companies listed on the Colombo Stock Exchange (CSE) and performance
throughout 2015-2019. It has been used Amivest liquidity, turnover liquidity, and
Gopalan liquidity as the liquidity measures. Combined linear regression was used to
examine the relationship between variables. Using some statistical tests the study has
determined that there was no meaningful relationship between dividend policy and
liquidity measures of Amivest liquidity and turnover liquidity. However, the study
detected a significant reverse relationship between dividend policy and Gopalan
liquidity. It emphasizes that firm dividend policy is affected by the firm liquidity but
not by the stock market liquidity in the Sri Lankan context.
