The Relationship between Ownership Structure and Dividend Policy: Evidence from Licensed Commercial Banks in Sri Lanka

Abstract

In today's dynamic business environment, ownership structure and dividend policy are increasingly recognized as critical financial concepts. This study aims to examine the impact of ownership structure on dividend policy in licensed commercial banks in Sri Lanka. The research considers Managerial Ownership, Institutional Ownership and Foreign Ownership as independent variables, while Dividend Policy serves as the dependent variable, with Firm Size included as a control variable. The study utilizes annual data from 2019 to 2023, covering a sample of 20 licensed commercial banks. Data analysis was conducted through applying descriptive statistics, correlation analysis, and multiple regression analysis to assess the relationships among variables and the influence of ownership structure on dividend policy. The correlation analysis indicates a significant negative relationship between Institutional Ownership and Dividend Policy, while Foreign Ownership exhibits a significant positive relationship with Dividend Policy. Multiple regression results further confirm that Institutional Ownership negatively impacts Dividend Policy. However, the study finds no significant impact of Managerial Ownership, Foreign Ownership, or Firm Size on Dividend Policy. The findings of this study provide valuable insights for investors and companies, enabling them to make informed investment decisions. Understanding the relationship between ownership structure and dividend policy enhances investor performance and contributes to corporate governance practices.