Abstract:
The behavior of the dividend policy is the most debatable issue in corporate finance.
Many researchers try to expose the issue regarding the dividend behavior or dynamics
and determinants of dividend policy but still do not have an acceptable description for
firms' observed dividend behavior. Therefore, the present research focused on analysing
the factors influencing dividend policy giving special reference to the Bank Finance and
Insurance firms listed in Colombo Stock Exchange to identify the factors influencing
the dividend policy of Bank Finance and Insurance firms listed in Colombo Stock
Exchange. The investigation was performed using panel data procedures for a sample of
26 Bank Finance and Insurance firms listed in the Colombo Stock Exchange during
2010-2011 – 2014-2015. This period was selected to identify financial behavior
immediately after the ethnic crisis. Secondary data collected from annual reports
published by the Colombo Stock Exchange was regressed to find the influence on
dividend policy. Current earnings, liquidity constraints, operating cash flows, free cash
flows, availability of investment opportunities and past dividend patterns significantly
influence dividend policy in Bank Finance and Insurance firms listed in Colombo Stock
Exchange. The findings revealed that the current earnings, liquidity constraints, and past
dividend patterns significantly influence dividend policy on Bank Finance and
Insurance firms listed on Colombo Stock Exchange. Free cash flows, operating cash
flows, and the availability of investment opportunities have a significant negative
influence on the dividend policy of Bank Finance and Insurance firms listed in the
Colombo Stock Exchange. Findings will be benefited to the directors, top-level
managers, shareholders and potential investors for their decision making.
