Abstract:
Dividend policy is a decision taken by the company directors about dividend
payment which is distributed among shareholders of the company. Demand for
the company’s shares is basically arisen from the attractive dividend policy that
a particular company follows on. The decision over dividend payments by the
companies is therefore an important part of corporate financial management policies.
Hence the study leads to an examination of the interrelationship between the
dividend policy and earnings per share based on the evidence from manufacturing
companies listed in Colombo Stock Exchange. Out of 41 listed companies, 19
are considered using simple random sampling method for this study. The data
was collected for the period from 2012 to 2018 and obtained from the web site of
Colombo Stock Exchange. Different conclusions are made by different authors
regard to the relationship between dividend policy and earnings per share in the
past. Therefore the study aims to find out the relationship between dividend policy
and earnings per share in the manufacturing companies listed in Colombo Stock
Exchange. Dividend payout ratio, dividend per share are considered as independent
variable of study. The dependent variable is earnings per share of the firm which
obtained directly through the annual reports of the companies. In addition to this
company age, firm size was considered as control variables in the study. To test
the hypothesis of this study, simple least square regression was utilized by using
EViews 8 version. The analyzed results shows that a significant negative relationship
between dividend payout ratio and earnings per share. Also a significant positive
relationship between dividend per share and earnings per share. Company age and
firm size show there are no statistically significant relationship with earnings per
share. Therefore it is concluded that dividend policy decisions are highly affected
the market coverage of the firms in Sri Lankan manufacturing sector.
