Title: Ownership structure and dividend policy: application of Lintner's dividend model in Sri Lanka

Authors: K.M.K.N.S. Kulathunga; A.A. Azeez

Addresses: Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka ' Department of Finance, Faculty of Management and Finance, University of Colombo, Sri Lanka

Abstract: This paper investigates the effect of ownership structure on the dividend policy of 77 Sri Lankan firms listed in the Colombo Stock Exchange over the period 2006-2014. The Lintner's full adjustment model and the partial adjustment model are used to examine the potential relationship between ownership structure and the dividend policy. We find that the ownership identity matters in determining the dividends according to Lintner's dividend model in Sri Lanka. Compared to the full adjustment model, the partial adjustment model is superior in explaining the variation in dividends with variables associated in different ownership structures. There is a negative association between institutional, managerial ownership structures and the dividend policy and a significant positive association between concentrated ownership structure and the dividend policy. In addition, the dividend in the preceding year is highly significant in explaining the succeeding year's dividend, thus confirming the stability of the dividend policy.

Keywords: dividend policy; ownership structure; full adjustment model; partial adjustment model; panel data; Sri Lanka.

DOI: 10.1504/IJAF.2017.088026

International Journal of Accounting and Finance, 2017 Vol.7 No.3, pp.253 - 269

Received: 13 Aug 2016
Accepted: 25 Apr 2017
Published online: 17 Nov 2017 *

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