THE RELATIONSHIP BETWEEN DIVIDEND

PAY-OUT AND FIRM PERFORMANCE:

Empirical Evidence from Listed Manufacturing Firms

in Sri Lanka

By

Rasathrie M.H.T.M

MF/2011/3179

Department of Accounting and Finance

July 2016

Dissertation Presented to the Faculty of Management and Finance

of University of Ruhuna

in Partial Fulfillment of the Requirements for the Degree of

Bachelor of Business Administration

1
 Acknowledgement

I would like to express my sincere gratitude to Mr. K.G.P.V. Gunarathna, my

dissertation supervisor who assisted and guided to complete this dissertation
successfully. His excellent and continuous guidance provided me an excellent support
for doing this dissertation.

Then, I would like to thank lectures in the Faculty of Management and Finance,
University of Ruhuna, who supported me to complete this dissertation. Also I would
like to thank my ever loving mother and father for gave me a grateful support to success
this dissertation. Ultimately I am thankful to my dear friends who gave me special
support during the writing this dissertation.

i
 Dedication

I dedicate this dissertation to my ever loving mother and father

who gave me encouragement.

ii
 Table of Content

Acknowledgement ......................................................................................................... i
Dedication .....................................................................................................................ii
Table of Content......................................................................................................... iii
List of Tables ............................................................................................................... vi
List of Figures.............................................................................................................vii
List of Acronyms ...................................................................................................... viii
Declaration................................................................................................................... ix
Certification .................................................................................................................. x
Abstract ........................................................................................................................ xi
CHAPTER 01 ............................................................................................................... 1
INTRODUCTION........................................................................................................ 1

1.1 Research Background ........................................................................................... 1

1.2 Statement of Problem ........................................................................................... 2

1.3 Research Question and Research Objectives ....................................................... 3

1.3.1 Research question .......................................................................................... 3
1.3.2 Research objectives ....................................................................................... 3

1.4 Research Methodology......................................................................................... 3

1.5 Significance of the Study ..................................................................................... 4

1.6 Limitations of the Study ....................................................................................... 4

1.7 Summary and Organization of the Chapter .......................................................... 5

CHAPTER 02 ............................................................................................................... 6
LITERATURE REVIEW ........................................................................................... 6

2.1 Introduction .......................................................................................................... 6

2.2 Dividend and Dividend Pay-out ........................................................................... 6

2.3 Dividend Policy .................................................................................................... 9

2.4 Relationship between Dividend payout and Firm Performance......................... 12

2.4.1 Positive Relationship between Dividend payout and Firm Performance.... 12

iii
 2.4.2 Negative Relationship between Dividend payout and Firm Performance .. 16
2.4.3 Other Findings between Dividend payout and Firm Performance ............. 17
2.4.4 Sri Lanka’s Findings between Dividend payout and Firm Performance .... 18

2.5 Summary ............................................................................................................ 19

CHAPTER 03 ............................................................................................................. 20
METHODOLOGY .................................................................................................... 20

3.1 Introduction ........................................................................................................ 20

3.2 Data Collection ................................................................................................... 20

3.3 Sample of the Study ........................................................................................... 20

3.4 Measurement of Variables ................................................................................. 22

3.4.1 Measurement of dividend pay-out ............................................................... 22
3.4.1.1 Dividend pay-out ratio (DPR) .............................................................. 22
3.4.2 Measurements of firm performance ............................................................. 23
3.4.2.1 Return on assets (ROA) ......................................................................... 23
3.4.2.1 Return on equity (ROE) ........................................................................ 23
3.4.3 Control Variable (Firm size) ....................................................................... 23

3.5 Method of Analysis ............................................................................................ 24

3.6 Summary ............................................................................................................ 25

CHAPTER 04 ............................................................................................................. 26
DATA PRESENTATION AND ANALYSIS ........................................................... 26

4.1 Introduction ........................................................................................................ 26

4.2 Descriptive Analysis .......................................................................................... 26

4.3 Correlation Analysis ........................................................................................... 31

4.4 Normal Distribution ........................................................................................... 32

4.5 Hetroskedasticity and Linearity Analysis .......................................................... 32

4.6 Regression analysis ............................................................................................ 34

4.7 ANOVA analysis................................................................................................ 35

4.8 Summary ............................................................................................................ 36

CHAPTER 05 ............................................................................................................. 38

iv
CONCLUSIONS ........................................................................................................ 38

5.1 Introduction ........................................................................................................ 38

5.2 Key Findings and Conclusion ............................................................................ 38

5.3 Implications and Future Research ...................................................................... 39

REFERENCES...........................................................................................................xii
APPENDIX ................................................................................................................. xv

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 List of Tables

Table 3.1: Variables, Proxies and Measurements…………………………………..24

Table 3.2: Regression models ……………………………………………………...25

Table 4.1: Descriptive statistics of DPR 2009-2015………………………………..27

Table 4.2: Descriptive statistics of ROE 2009-2015………………………………..28

Table 4.3: Descriptive statistics of ROA 2009-2015…………………………….….29

Table 4.4: Descriptive statistics of TA 2009-2015………………………………….30

Table 4.5: Correlation Matrix- Testing for Association…………………………….31

Table 4.6: Output of regression M1 and M2…………………………………….….34

Table 4.7: Result of ANOVA analysis……………………………………………...36

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 List of Figures

Figure 1.1: Conceptual Framework……………………………………………….…3

Figure 4.1: DPR, ROE and ROA ratios of manufacturing firms…………………..26

Figure 4.2: Scattered diagram of M1……………………………………………….32

Figure 4.3: Scattered diagram of M2……………………………………………….32

Figure 4.4: Residual plots of M1……………………...……………………………33

Figure 4.5: Residual plots of M1........................................................................…...33

Figure 4.6: Residual plots of M1………………………….………..………………34

Figure 4.7: Residual plots of M2…………………………………………………...33

Figure 4.8: Residual plots of M2……………………………………………….…..33

Figure 4.9: Residual plots of M2…………………………………………………...34

vii
 List of Acronyms

CSE: Colombo Stock Exchange

DPR: Dividend Pay-out Ratio

EPS: Earning Per Share

FS: Firm Size

GDP: Gross Domestic Product

NPV: Net Present Value

ROA: Return on Asset

ROE: Return on Equity

TA: Total Assets

viii
 Declaration

I hereby declare that this dissertation is my own work and effort and that, to the best of
my knowledge and belief, it contains no material previously published or written by
another person nor material which has been accepted for the award of any other degree
or diploma of the university or other institute of higher learning, except where due
acknowledgment has been made in the text.

Signature of the student: ________________________________

Name of the student: ________________________________

Registration number of the student: ________________________________

Date: ________________________________

ix
 Certification

This is to certify that this dissertation submitted by Rasathrie M.H.T.M

(MF/2011/3179) in partial fulfillment of the requirement for the Degree of Bachelor of
Business Administration in Accounting at the Faculty of Management and Finance of
the University of Ruhuna is a record of the own work carried out by the student under
my supervision. This dissertation has been submitted with my approval.

____________________________

Supervisor

Mr. K. G. P. V. Gunarathna

Department of Accounting and Finance

Faculty of Management and Finance

University of Ruhuna

____________________________

Head, Department of Accounting and Finance

Faculty of Management and Finance

University of Ruhuna

x
 Abstract

Manufacturing industry plays a key role in generating gross domestic

product. Therefore manufacturing firms are most important firms
relevant to economic development. So that dividend pay-out directly
related with firm performance of the manufacturing firms. Thus
studying the relationship between dividend pay-out and firm
performance is very important. The purpose of this study is to
investigate the relationship between dividend pay-out and firm
performance in Sri Lankan manufacturing firms. Moreover the study
attempts to examine the significant differences among the selected
firms. Data was gathered from financial statements of 10 listed
manufacturing firms on Colombo stock exchange over the period from
2009 to 2015. Descriptive, multiple regression, correlation and ANOVA
analysis were used for analyzing data. Return on assets and return on
equity were used as firm performance variables. Dividend pay-out ratio
was used as dividend pay-out variable. Firm size was used as the control
variable and it was measured by total assets. The findings of this study
revealed that dividend pay-out ratio has a significant and a positive
relationship with return on assets and return on equity. The firm size
showed an insignificant and a positive relationship with return on assets
and return on equity. Furthermore the results revealed that dividend pay-
out, return on assets, return on equity and firm size had significantly
differences among the firms. This study provides valuable information
for the investors and financial managers to make sound investments and
financial decisions to maximize their wealth and profit. The top
management can use the information for formulating effective dividend
policies. This information will be helpful to develop stock market and
economy.

Keywords: Colombo stock exchange, dividend pay-out, firm

performance, return on assets, return on equity

xi
 CHAPTER 01
INTRODUCTION
1.1 Research Background

Dividend policy is a very important one in the current competitive business

environment. Because it is considered as the regulations and guidelines that are used to
decide how much pay for shareholders as dividend payments (Ajanthan, 2013). On the
other hands dividend policy that plays a crucial role as a strategy for firm to adopt in
distributing income among their shareholders has an attractive interest over the past
decade (Onanjiri & Korankye, 2014). Importantly dividend policy is one of the most
complex aspects in firms. Because dividend payout has been considering as a primary
index of firm performance (Kapoor, Anil, & Misra, 2010). Therefore understanding
about the pattern of the dividends payments is very important to the firms. Furthermore
dividend policy has a significant influence on the firm performance (Onanjiri &
Korankye, 2014). Hence top management should pay attention about dividend policy
for maximizing the shareholders wealth.

Rehman and Takumi, (2012) dividend payment has always been a debatable
subject in corporate finance. Many researchers in past have come up with theoretical
models discovered what factors financial managers should consider while making a
dividend decision. Therefore, dividend decision is important for both of the investors
and firms. Because firms needs to decide how to distribute their wealth generated
among their shareholders using their dividend policy (Onanjiri & Korankye, 2014).
Uwuigbe, Jafaru, and Ajayi, (2012) stated that dividend or profit allocation decision is
one of the important decisions in the field of finance. Because dividend decisions are
important in determining the amount of funds that flow to investors and the amount of
funds that are retained by the firm for investment. Moreover, distribution of the
dividends is vital for investors since dividends are considered to be a signal of
company’s financial wellbeing and dividends also help in maintaining the market price
of the corporation’s share (Rehman & Takumi, 2012).

Provision of a company’s profit is a sensitive function in the financial

management. Especially Companies need dividend policy to maintain optimality in the
allocation of profit among the shareholders and the company retained earnings
(Oyinlola, Oyinlola, & Adeniran, 2014). Velnampy, Nimalthasan, and Kalaiarasi,

1
(2014) stated that the investors expectation is to earn a higher return or earnings through
their investment where it operates. Ouma (2012) stated that firm performances can be
viewed as how well a firm enhances its shareholders’ wealth and the capability of a
firm to generate earnings from the capital invested by shareholders. Moreover dividend
policy can affect the value of the firm as well as in turn, to the wealth of shareholders.
Importantly the impact of dividend payout on the financial performance is necessary as
it will assist respective corporate executives in making better dividend payout
decisions. They can attract new investors to the firm and retain existing investors in the
firms (Onanjiri & Korankye, 2014).

1.2 Statement of Problem

Most of the studies have found that dividend pay-out has a positive relationship with
firm performance of manufacturing firms (Abdul & Muhibudeen, 2015; Amidu &
Abor, 2006; Hasan, Ahmad, Rafiq, & Rehman, 2015; Obembe, Imafidon, & Adegboye,
2014; Uwuigbe et al., 2012). On the other hand some studies show that there is a
negative relationship between dividnd pay-out and firm performance (Rehman &
Takumi, 2012; Onanjiri & Korankye 2014; Salehnezhad, 2013). In addition to that
there is no significant relationship between dividend pay-out and firm performance
(Osegbue, Ifurueze, & Ifurueze, 2014). Importantly, there are few studies about the
relationship between dividend pay-out and firm performance among the listed
manufacturing firms in Sri Lanka (Velnampy et al., 2014; Ajanthan, 2013). It is
doubtful whether the relationship between dividend pay-out and firm performance is
negative or positive in Sri Lankan manufacturing firms.

Even though several studies have been conducted to investigate the relationship
between dividend pay-out and firm performance of manufacturing industries in
different contexts. Those findings can’t be applied to Sri Lankan context. Since when
comparing Sri Lanka with other countries which has considerable differences of
economic, political and ethical background. Thus it is difficult to get a clear idea or a
conclusion of the relationship between the dividend pay-out and firm performance in
manufacturing industry in Sri Lanka. Therefore this study is done for filling this gap.

2
1.3 Research Question and Research Objectives
1.3.1 Research question

This study considers the influence level of the dividend pay-out on the firm
performance of the manufacturing industry in Sri Lanka. Therefore this study aims to
test the following research question.
 How does dividend pay-out affect firm performance in the manufacturing
industry in Sri Lanka?

1.3.2 Research objectives

 Assess the impact of dividend pay-out on firm performance of Sri Lankan

listed manufacturing companies
 Examine the significant differences of dividend pay-out and firm
performance of selected manufacturing firms listed in CSE

1.4 Research Methodology

This study hopes to identify what is the relationship between dividend pay-out and firm
performance in the manufacturing industry from 2009 to 2015. It consists of 10 listed
manufacturing firms in Colombo stock exchange (CSE) as the sample. The data is
collected by using secondary sources. The annual reports of the manufacturing firms
are referred mainly. Regression analysis, ANOVA analysis, descriptive analysis and
correlation analysis are used to find out the relationship between dividend pay-out and
firm performance.

Dividend Pay-out Firm Performance

 Dividend Pay-  Return on Assets

out Ratio  Return on Equity

Firm Size

Figure 1.1: Conceptual Framework

Figure 1.1 illustrates the conceptual framework that helps to identify the
relationship between the dividend pay-out and firm performance of the listed firms. It
helps to identify the independent and dependent variables in this study. Dividend pay-

3
out ratio (DPR) is the independent variable, the return on assets (ROA) and the return
on equity (ROE) are the dependent variables. The firm size is considered as the control
variable.

1.5 Significance of the Study

The business environment is developing day by day. It is very dynamic and competitive
in the present period. Manufacturing industry directly contributes to the economic
stability and development. Therefore, investors pay their direct attention to the
manufacturing industry. The findings of this study are very important to the various
internal and external parties. They can get the correct and favorable decision by
analyzing those findings. Especially investors of manufacturing firms can evaluate their
future dividend decision also this study is useful to the shareholders and long term
creditors. When they give more attention to the profitability to get a better
understanding about the safety of their interest income and to take the decision whether
to invest or withdraw their investments in the future. According to the study findings
firm managers can use a suitable dividend policy to the firm by considering the
relationship between dividend pay-out and firm performance. Not only that the top
management can formulate dividend policy by using these findings or they can also
maintain exist dividend policy or change existed policy.

Many previous studies were based on the developed countries and several
studies can be seen relevant to the Sri Lankan context. Therefore the findings of the
previous studies can’t be able to apply to get a clear idea about this relationship. The
findings of this study are very useful for the Sri Lankan context. Furthermore findings
of this study assist to conduct the future studies for the scholars.

1.6 Limitations of the Study

This study is based on the manufacturing industry and it doesn’t pay attention to the
remaining 19 business sectors. The findings of this study can’t be used to take decision
about dividend pay-out and firm performance of the whole business sector. It is limited
to recent seven years and selected ten manufacturing firms listed in CSE only. It is the
major limitation of this study. The sample is consisted with few manufacturing firms to
analyze data. That is not sufficient to draw a right and significant conclusion on the
entire population in Sri Lanka.

4
 The attention was paid only to the manufacturing firms listed in CSE and didn’t
pay attention to non-listed manufacturing firms. Inflation may be affected to take future
dividend decisions badly. It doesn’t pay attention to other factors such as political, legal,
social, risks and uncertainty conditions influenced to dividend pay-out and firm
performance. Annual reports are used for gathering data which were published by the
CSE. Therefore findings of this study are depended on the accuracy, reliability and
quality of the annual reports information which were provided by manufacturing firms.

1.7 Summary and Organization of the Chapter

Manufacturing firms play a vital role in the economy. Manufacturing industry supports
to reduce unemployment problem as well as to increase the national income in the
economy. This study conducts to assess the impact of dividend pay-out on the firm
performance of selected listed manufacturing firms in Sri Lanka. The findings of this
study will support to the manufacturing firm management and investors to take their
economic decisions according to Sri Lankan context. This study consists of five
chapters. They are introduction, literature review, methodology, data present and
analyzing and conclusions chapter. After the first chapter the literature review will be
presented with findings, definitions and discussions of the previous studies about the
relationship between dividend pay-out and firm performance. The third chapter presents
methodological approach of the study and sources of the data gathering. The fourth
chapter represents the presentation of the data and analyses. Finally, the conclusion
chapter is summarized with the key findings of this study.

5
 CHAPTER 02
LITERATURE REVIEW
2.1 Introduction

The purpose of this study is to investigate the relationship between dividend pay-out
and firm performance of listed manufacturing firms in Sri Lanka. This chapter presents
both theoretical and empirical literatures relating to the dividend, dividend pay-out and
dividend policy from extracting the previous studies. Furthermore this chapter provides
different types of findings about the relationship between dividend pay-out and firm
performance. It is important to review the literatures to get an approach to conduct the
study and it will help to answer the research question.

2.2 Dividend and Dividend Pay-out

Dividend is allocated as a fixed amount per share to shareholders of company for the
specific periods. Generally, distribution of profits and the recommendations are
determined by board of directors of the company. Dividends are not distributed when
there are no profits but corporations should pay dividend. It is obligate to pay corporate
tax including taxes to the proper government authorities (Osegbue et al., 2014).
Velnampy et al., (2014) identified that dividends are compensatory distribution to
equity shareholders for both time and investment risks undertaken. Such distributions
are usually net of tax and obligatory payments under debt capital and they represent a
depletion of cash assets of the company.

Arnott and Asness, (2003) revealed that future earnings growth is combined
with high rather than low dividend pay-out. Onanjiri and Korankye, (2014) argued that
non-dividend paying firms experience low profitability or performance compared with
firms which pay dividends. Dividend pay-out has been a debatable subject in corporate
finance. Dividend decision is important for both of the investors and corporations.
Ajanthan, (2013) stated that dividends are most important to the shareholders and this
is what they look for when they want to invest in a firm as they show the earnings
potential of that firm. Furthermore he revealed that current year earnings as well as
previous year’s dividends impact the dividend payment pattern of the firm.

Ouma, (2012) stated that companies will prefer internally generated cash flows
than external funds and therefore they pay low dividends. Conversely he suggested that
firms pay high or maximum dividends in low growth. Furthermore, he argued that the

6
most of shareholders afraid of higher taxes are likely to prefer low or no dividend pay-
outs in an effort to reduce their taxable income like that preferring capital gains. Further
he revealed that high dividend pay-out firms tend to experience strong future earnings
but relatively low past earnings growth regards market observers having a contradicting
view.

Amidu, (2007) stated that paying dividends can deduct or minimize a potential
over investment problem. Furthermore he revealed that investors like to get more
dividends payments. He pointed out that it is self-control. This argument comes to
investors wanting to control themselves from consuming too much in the today and
only to allow to consume present income such as dividends. Kapoor, Anil, and Misra,
(2010) discovered generally the dividend payment is based on the cash flows. Dividend
decision in the corporate is governed by key determinants factors that need
consideration by the managers while formulating a dividend policy. The key
determinants factors are profitability, share price behavior, retained earnings, size of
the firm, cash flow, sales growth, liquidity and volatility in earnings of the firm.

Ng’ang’a, (2014) the results of management opinions on dividends and

performance of the firm viewed that most of the respondents agreed that a firm should
formulate their dividend policy to produce maximum value for its investors. An optimal
dividend policy strikes a balance between the future growth of the firm and current
dividends that leads to the maximization of stock prices. And he showed that dividends
act as a signaling mechanism to investors.

Oyinlola et al., (2014) stated that the dividend pay-out pattern shows that
profitable mature firms pay higher dividend than younger or junior rapidly growing
firms. Moreover they found that a firm’s dividend basically indicates the stability of the
firm’s future cash flows. Furthermore they pointed out in a related their study that 87
percent of dividend paying firms believed that the usefulness of dividends to signal
information regarding the company growth and future earnings. Conversely they found
that firms are reluctant to decrease dividends since this could lead investors to interpret
poor performance or profitability and cause the stock prices to fall as well. Moreover
they said that dividend announcements convey information about the future prospects
of the firms.

7
 Uwuigbe et al., (2012) stated that a firm’s dividend basically indicates the
stability of the firm’s future cash flows. Furthermore they revealed that the main factors
influence a firm’s dividend decisions. Those are cash flow considerations, investment
returns, after tax earnings, liquidity, future earnings, past dividend practices, inflation,
interest, legal requirements and the future growth projection. Such dividend
distributions are usually net of tax and obligatory payments under debt capital and
represent a depletion of cash assets of the firm. Their study was emphasized the fact
that investments made by firms impact the future earnings and future dividends
potential.

The traditional view of the dividend decisions state that at a particular time the
amount of cash paid at the present as dividends are more valuable than the retained
cash. Especially dividends also help in maintaining the market price of the corporation’s
share (Rehman & Takumi, 2012). Obembe, Imafidon, and Adegboye, (2014) pointed
out that firms operating in highly competitive markets wish to distribute more and extra
cash dividends among their shareholders. Because they are more susceptible to market
discipline when mismanagement of firm’s resources are noticed. In order to avoid or
rejection liquidation, loss of bonuses associated with stock price performance and loss
of managerial jobs, managers in more competitive markets are therefore assumed to
pay more dividends thereby limiting excess-investment in projects with poor valuation.

Gill, Biger, and Tibrewala, (2010) explained that corporate profitability has
been regarded as the primary indicator of a firm's capacity to pay dividends. There are
many reasons as to why companies should pay or not to pay dividends. There are the
dividend pay-out is significant for investors. Because dividends provide certainty about
the company’s financial well-being, dividends are attractive for investors looking to
secure current income, and dividends help to maintain market price of the firm share.
Company's income can be invested in operating assets, to acquire securities, used to
retire debt, and distribute to shareholders in the form of cash dividends. Issues that arise
if a company decides to distribute its income to shareholders include the proportion of
the after tax income would be distributed to shareholders. Whether the distribution
should be as cash dividends, or the cash be passed on to shareholders for buying some
shares.

8
2.3 Dividend Policy

Ajanthan, (2013) found that dividend policy as a one of the stability future cash flow
of the firm. Furthermore he revealed that what the key determinants are affected for the
good dividend decisions. It includes liquidity position, profit after tax, cash flow
considerations, and future earnings, past dividend practices, returns on investment,
legal requirements, growth prospects, inflation and interest rates. Moreover, he stated
that most of the firms like to pay cash dividends. It means that they have to decide on
what percentage of their earnings are going to distribute among their shareholders and
this means coming up with a dividend policy to apply. The dividend policy adopted by
firms has an influence on the market value of the firm. Moreover he discovered that
good and fairly dividend pay-outs do indicate that companies are generating real
earnings and companies are not giving a misleading picture of the reality and consider
the firm’s dividend policy as a major determinant of a performance in the firm.

Uwuigbe et al., (2012) explained that the dividend policy is the regulation as
well as guidelines that a company’s use to decide to make dividend payments of the
shareholders. Furthermore he stated many studies have tried to discover problems
regarding the dividend dynamics and determinants of dividend policy but still don’t
have an acceptable and fairly explanation or idea for the observed dividend behavior of
firms as well as dividend policy has analyzed for many decades, but no universally or
generally accepted and fairly explanation for companies observed dividend behavior
has established.

Ouma, (2012) argued that investors attract to the firms that pay the more
dividends that closely match their wants and needs. Firm value should be affected by
its dividend policy. A firm’s dividend policy can provide additional and long time view
into the cash flows. Dividend policy can minimize or reduce agency problems between
the top managers and their shareholders. Dividend policy is important for maximizing
shareholders value as well as enhances the firm value to shareholders. In an imperfect
market dividend can influence shareholders wealth by providing lot of information to
investors or through wealth redistribution to shareholders. Firm’s dividend policy can
influence capital structure of the firm and sound investment decisions. Dividend policy
can be showed as a results of the investment decisions and financing decisions. The
company needs to decide how to distribute their profit by using their own dividend

9
policy. Furthermore, discover that the firm’s dividend policy can impact one or more
of imperfections in the real world.

ʽʽDividend policy has been controversial subject in finance field. Scholars have
focused on this subject over five decades. Dividend policy is important from two
aspects: 1- Dividend is essential factor on investing of companies. If we have higher
dividend, internal resources of company for investment projects will decline and it will
increase need of exterior resources, therefore, it can impact prize of the company’s
stock. 2- Many of stockholders are seeking to cash dividend. Thus, Managers for
maximizing benefits of shareholders always must balance between interests of
shareholders in order to chance opportunistic investment and pay cash dividend of
shareholders. Companies can spend annual net income to cash dividend or use it for
other objectives like repay debt or to finance new investment. Increase of dividend can
lead to pay cash to shareholders” (Salehnezhad, 2013, P 71).

Dividend are consider part of the profit of a company and distributed between
their shareholders. Managers should decide on what percentage they are allocating or
going to distribute for their shareholders. This distribution should be in the cash
dividends, or the cash passed to the shareholders for buying some shares of company.
When considering above factors they determined why companies should pay or not pay
dividends. Number of factors have been identified which influence the dividend pay-
out ratios of the firms which include the followings factors such as profitability, risk,
cash flow, and agency cost, the level of current, pattern of past dividends and expected
future earnings and growth (Ng’ang’a, 2014).

Onanjiri and Korankye, (2014) revealed that dividend policy and dividend
payout affect firm performance in opposite directions. Dividend policy is one of the
core elements in corporate finance. Furthermore they stated that dividend policy is the
strategy a firm adopts in distributing income among their shareholders. Rehman and
Takumi, (2012) described that the dividends behaviour patterns are subjective to the
profitability of the company. When the companies are more profitable, they hoped to
pay more dividends compared to those that are less profitable companis. Shareholder’s
wealth is maximized by using effective investment strategies and financed by an
optimal capital structure. They concluded that the companies don’t know which types
dividend policy should be use and they are not aware of how many irrational investors

10
are there in the market but a rational investor can maximize his profit by choosing the
right dividend policy.

Dividend policy affects agency costs. It can reduce of agency cost through
increased monitoring by capital market. The theoretical principles underlying the
dividend policy of the firm can be pointed out either in terms of information tax-
adjusted theory, asymmetries or behavioural factors. Corporate dividend policy remains
controversial and involves judgment by the decision makers (Amidu & Abor, 2006).
Velnampy et al., (2014) revealed that the conflict can be circumvented by large
dividend payment amount to stockholders of the firms. They observed that firms have’t
obligations to declare dividends payments on common stock and they don’t like to
change the exsist dividend policy in the every year. Because the every firm try to meet
their stockholders hope to build good image about dividend payouts with or without
large block shareholders.

Obembe et al., (2014) stated that dividend policy is the financial policy
regarding paying cash dividend. Furthermore, they reported that a higher and stable
dividend from operating companies than from holding companies when the operating
companies face severe agency conflicts. It is consistent that stockholders choose firms
that separate tax effects from agency effects in dividend policy. The profitability level
is one of more important fact that may influence firm’s dividend policy. They also
discovered that firms like to pay lower dividend amount to avoid the high cost of
external financing where the earnings are unstable to keep the stable of dividend policy.
They argued that firms in the same risk level, provided that the investment program of
the firm is clear, the dividend policy is irrelevant or inadequate of the firm value.

Oyinlola et al., (2014) found that dividend policy behaviour is one most
debatable issue in the corporate finance and still keeps its prominent places. They are
both in developed and emerging markets. They staed that a lot of theories have been
propounded around the policy of dividend, retained earnings, trade-off and the
contended effect of dividend pay-out on stock values. Osegbue et al., (2014) stated that
the level of profitability is one of the significant factors that may influence firm’s
dividend policy.

Amidu, (2007) revealed that dividend policy is irrelevant for the cost of capital
and the value of the firms in a world without taxes or transaction cost. Furthermore that

11
investors can create any income by selling and buying shares and the expected return
required to motivate them to hold in the firm. Shares will be invariant to the way the
firm packages its dividend payments and issue new shares. The firm’s assets,
investments opportunities, expected future net cash flows and cost of capital are not
affected or dominated by the choices of dividend policy. Its market value is unaffected
by any change in the firm’s pay-out pattern.

Kapoor et al., (2010) stated that a dividend policy can be of two types. They are
managed and residual. In residual dividend policy the amount of dividend is simply the
cash left after the firm makes desirable investments using NPV (Net Present Value)
rule. The manager believes dividend policy is most important to their investors and it
positively influences on share price valuation. They will adopt to manage dividend
policy.

2.4 Relationship between Dividend payout and Firm Performance

There is substantial literatures on the relationship between dividend payout and firm
performance.

2.4.1 Positive Relationship between Dividend payout and Firm Performance

Ouma, (2012) found that there is a significant and a positive relationship between
dividend payout and firm performance on listed firms in Kenya by using regression
analysis. In Kenya, fifty eight companies are listed on Nairobi Securities Exchange.
The secondary data for regression analysis was collected from forty one listed
companies in the Nairobi Securities Exchange for the nine year period from 2002 to
2010. Furthermore, they identified that there is a positive relationship between current
dividend payout and future Earnings growth.

Seyedkkhosroshahi, Sabaei and Vatankhah, (2013) discovered that profitability

has a significant and a positive impact on dividend pay-out in all listed firms in Tehran
Stock Exchange for the period from 2005 to 2011. On the other hand, investors in
Tehran Stock Exchange use the profitability as a criterion to determine the dividend
payout. The results of the linear regression model shows that the investors in Tehran
Stock Exchange don’t consider stock turnover rate as a variable for ditermining the
amount of dividend payment. Agyei and Marfo-Yiadom, (2011) examined the
relationship between dividend pay-out and firm performance of commercial banks in
Ghana. For that, they selected sixteen commercial banks in Ghana for the period from

12
1999 to 2003 by using secondary data. They concluded that the dividend policy has a
significant and a strong effect on the firm’s value. Forthermore they found a positive
correlation between profitability and dividend pay-out.

Amidu and Abor, (2006) carried out their study to examine the determinants of
dividend pay-out ratios of listed firms on Ghana’s Stock Exchange for the period from
1998 to 2003. They selected 22 firms which represented 76% of the listed firms in
Ghana. Their results viewed that there was a positive relationship between dividend
pay-out and profitability, cash flow, and tax. This results led to conclusion that,
profitable firms in Ghana’s Stock Exchange regularly paid high dividends than those
that were not very profitable.

Arnott and Asness, (2003) found that the positive relationship between current
dividend pay-out and future earnings growth in the US (United Status) from 1999 to
2000. They found that the managers are reluctant to cut dividends in the U.S (United
Status). They found this relationship is based on the free cash flow. Conversely they
argued that their findings give a challenge to market observers who see the low dividend
payouts of recent times as a sign of strong future earnings to come.

Abdul and Muhibudeen, (2015) discovered the relationship between dividend

pay-out and profitability of companies in the Oil & Gas industry in Nigeria. For that
they have selected Oando Plc as only one Oil company period from 1999 to 2013. They
found that firm performance has a significant and a positive impact on the dividend
pay-out. Furthermore they recommended that the managers should devote sufficient
time period for designing a dividend policy that will enhance firm performance and
shareholder wealth. They concluded that dividend pay-out is a most important critical
factor affecting the firm performance. Further they explained that, the company should
review their dividend policy in order to reduce or minimize agency cost and maximize
the profit of the firm.

Ng’ang’a, (2014) investigated the relationship between dividends and firm

performance on listed firm at the NSE (Nairobi Securities Exchange) and used 28 firm
that are listed from the different sectors in the NSE (Nairobi Securities Exchange) from
2006 to 2012. They found that there exists a relationship between dividends and firm
performance. There was a positive relation between net profit after tax and total assets,
revenues and dividends as shown by the positive coefficients. Total assets, revenues

13
and dividends are significantly affect the firm performance. The results showed that the
extent of the relationship between dividends and firm performance was significant. This
impact shows that dividend has a significant influence on the firm performance as
behave revenues and total assets. They viewed from the study on the factors that
influence the dividend policy showed that the level of current earnings, stability of
earnings, desire to maintain target capital structure, desire to maintain in the long run a
given fraction of earnings and pattern of past dividends are the top ranked factors in
determining the dividend policy adopted by firms (Ng’ang’a, 2014).

Oyinlola et al., (2014) examined the influence level of dividend pay-out in the
performance of beverage industry for that they selected 7 listed beverage Companies
listed in the Nigerian Stock Exchange from 2002 to 2010. The organizational
performance, EPS (Earning per Share) was correlated and had seen a significant and a
positive relationship. Moreover their suggestion is made that optimal dividend policy
that would better the lots of shareholders both in the short-run and long-run should be
adopted.

Uwuigbe et al., (2012) revealed that the firm performance has a significant
impact on the dividend pay-out among fifty sampled of listed firms in Nigeria for the
period from 2006 to 2010. An increase in the financial well-being of a firm tends
positively affect to the dividend pay-out level of the firm. Furthermore they stated that
there is a significant and a positive relationship between ownership structure and the
financial performance of the firm. Factors such as ownership structure, shareholder’s
expectations, tax position of shareholders, Opportunities, growth stage, capital
structure ,industry practices and access to capital markets can also be considered for
designing a dividend policy though they affect dividend payout to a moderate extend.
Furthermore they found that there is a significant and a positive association between
the firm’s performance and the dividend pay-out.

Obembe et al.,(2014) examined the impact of product market competition on

the dividend pay-out of non-financial firms listed on the Nigerian Stock Exchange. Data
and information were collected on 76 non-financial firms for covering 11 years from
1997 to 2007. They used pooled OLS (Ordinary Least Square) regression method with
robust standard errors for analyzing data. Results are showed that market power had a
significant and a positive impact on dividend payment. Furthermore they stated that the
product market competition impact negatively on dividend pay-out of firms in Nigeria.

14
More factors like that profitability and size of firms significantly and positively
influenced dividend payment. Firms classified in the manufacturing sub-sector of the
exchange paid significantly higher dividends than firms in the commercials and services
sub-sectors. Finally firms that were financially constrained were found to pay
significantly lower dividends compared with firms without financial constraints.
Furthermore they discovered that Cash flow had a significant impact on dividend pay-
out of firms in Nigeria and they found the link between the firms’ dividend policy and
investment decisions.

Amidu, (2007) examined the dividend policy influences on firm performance

of the publicly traded companies in Ghana. The analyze is performed using data derived
from the financial statements of listed firms on the GSE (Ghana Stock Exchange)
during the most recent eight-year from 1997 to 2004. The main value of this study is
the identification of how the dividend policy affects firm’s performance of listed firms
on the Ghana Stock exchange. The results show positive relationships among return on
assets, growth in sales, and dividend policy. Furthermore he revealed that dividend
policy is relevant to the performance of firms.

Farsio, Geary and Moser, (2004) found that increasing dividends in a given
quarter may be due to management’s policy to have satisfied investors. Thus are not
going to sell their shares when there is a decline in future earnings. In addition to that
when there is an increase in dividends which may be due to good performances in
previous periods that might continue well into the future. This is in support of the view
of a positive causal relationship between future earnings and present dividends. With
these concluded that the overall long-term relationship was insignificant as there was a
positive relationship between dividends and future earnings in some periods and a
negative relationship in some periods. They pointed out that there was no significant
relationship between dividends and firm’s earnings in the long run. They argued that
empirical studies conclude causal relationship exists between earnings and dividends
are based on short periods of time and so that misleading to potential investors. Their
analysis is based on data for the S&P 500 index over the period from 1988 to 2002 and
they used the Dickey-Fuller test, a simple regression test and the Granger causality test
for analyzing relevant data (Farsio et al., 2004).

Kapoor et al., (2010) found an insignificant and a positive relationship between

dividend pay-out and profitability of FMCG (Fast Moving consumer goods) firms

15
listed on NSE (National Stock Exchange) in India period from 2000 to 2008. Badu
(2013) revealed that insignificant and a positive relationship between dividend pay-out
and profitability of listed financial institutions on the Ghana Stock Exchange between
period from 2005 to 2009. On the other hand he stated that profitability does not
necessarily impact dividend pay-out in respect of the firms. Furthermore he argued that
financial managers of such firms pay dividends regardless of extending profit.

Gill et al., (2010) revealed that there is a positive relationship between debt to
equity ratio and dividend pay-out ratio of the service sector and the debt to equity ratio
with dividend pay-out ratio was a negative relationship of the manufacturing sector in
American. Conversely they found that debt to equity ratio is insignificant determinant
of dividend pay-out ratio in both manufacturing and service sectors in America. They
selected approximately 500 published financial-reports by public companies in year
2007 and only 266 financial reports were usable. Financial statements and proxies
submitted by companies to Securities and Exchange Board of USA (United Status of
America) were used to gather relevant data. Furthermore they argued that some of the
relationships between the independent variable and the dependent variable for
manufacturing firms are different from the firm of the service sector.

2.4.2 Negative Relationship between Dividend payout and Firm Performance

Hasan et al., (2015) investigated the relationship between dividend pay-out ratio and
profitability of a firm. For this, they selected energy and textile sectors in Pakistan for
the period from 1996 to 2008. Firm performance is measured by using earning per share
(EPS) and return on as- sets (ROA). The results of logarithmic regression showed that
there is a negative impact of dividend pay-out ratio on next year earnings of the firm.

Onanjiri and Korankye, (2014) have ascertained the impact of dividend pay-out
on the financial performance of quoted manufacturing firms in Ghana. Financial
statement data were obtained from GSE (Ghana Stock Exchange) and used fact book
and annual reports in Ghana from 2004 to 2011 financial years for the study. The
regression results have viewed that dividend pay-out significantly but negatively
impacts on financial performance in listed manufacturing firms in Ghana.

Grullon and Michaely, (2007) have investigated the product market competition
among 3,512 manufacturing firms in the US (United State) for the period from 1972 to
2006. Herfindahl index was used to measure the impact level of the product market

16
competition. The findings of the research show that the firms in more concentrated
industries were found with significantly lower pay-out ratio than firms in less
concentrated markets. The study also identified that there is a negative relationship
between concentration levels and pay-out ratios.

Kania and Bacon, (2005) have tried to disclose what are the motivation factors
to issue cash dividends to shareholders of firm. Their findings supposed that there is a
negative relationship between profitability and dividend pay-out ratio. This means that
the firms with higher or maximum profit when they pay lower dividend payments. They
derived their findings by selecting five hundred and forty two firms as the sample from
Multex Investor Database. They used Ordinary Least Square (OLS) regression method
for analysing relevant data.

Salehnezhad, (2013) discovered that significant and a positive relationship

exists between financial performance and dividend policy. Furthermore he also sated
that there was a significant and a negative relationship exists between economic
performance and dividend policy. Conversly, he found that significant relationship
exists between controlling variable (firm size) and dividend policy. The result based on
the listed company's on Tehran Stock exchange and investigated this relationship by
using fuzzy regression during from 2010 to 2012.

Rehman and Takumi, (2012) examined the key determinants of dividend pay-
out ratio in the largest stock exchange of Karachi Stock Exchange (KSE) in Pakistan.
The effect of Debt to equity ratio, Operating cash flow per share, profitability, market
to book value ratio, current ratio and corporate tax on dividend pay-out ratio were
analysed in the year 2009 for that they used 50 companies that announced dividend in
the 2009. Debt to equity ratio, profitability, current ratio and corporate tax were found
to be positive relationship with dividend pay-out ratio. Convealy they discovered that
operating cash flow per share and market to book value ratio has a negative relationship
with dividend pay-out ratio. Profitability, debt to equity and market to book value ratios
were found to be the significant determinants of dividend pay-out ratio in Pakistan.

2.4.3 Other Findings between Dividend payout and Firm Performance

Komrattanapanya and Suntraruk, (2013) revealed some importants facts that impact the
dividend pay-out of all listed firms in the Stock Exchange of Thailand for the period
from 2006 to 2010 by using Tobit regression analysis for analysing data. Mainly, they

17
discovered that profitability, liquidity and business risk are insignificantly related with
the dividend pay-out. This study reports that the financial leverage, investment
opportunity, sales growth and firm size have been influenced to dividend payout listed
firms of property and construction sector in Thailand. Kapoor et al., (2010) found that
there is no link between profitability and dividend pay-out in Indian FMCG (Fast
moving consumer goods) sector for the period from 2000 to 2008. The data has been
sourced from prowess database of centre for monitoring Indian economy.

Singhania, (2005) studied the dividend policy of Indian companies. For that he
selected 590 listed Manufacturing firms in India for the period from 1992 to 2004. The
findings were highlighted that the average dividend per share significantly increased
during the study period. Evbayowieru, (2011) found that the British firms pay the
highest dividend pay-outs in the industrialized world. North American firms pay higher
dividend pay-outs than the Western European and Japanese firms .

Osegbue et al., (2014) have identified the relationships between dividend

payment and corporate performance of listed banks on Nigerian stock exchange for the
period from 1990 to 2010. They have found that there was no significant relationship
between the dividend pay-out and corporate performance through their study.
Furthermore they stated that transaction cost don’t have a direct influence on the
dividend pay-out policy. The Nigerian banks look into account agency conflict, firm’s
reputation and high transaction costs, when they were making the decision about
dividends payments.

2.4.4 Sri Lanka’s Findings between Dividend payout and Firm Performance

Velnampy et al., (2014) aimed to find out the relationship between dividend policy and
firm performance of listed manufacturing companies on Colombo Stock Exchange. Out
of 37 Manufacturing companies are listed in CSE and 25 companies were s aelected to
use as the sample for the period from 2008 to 2012. The statistical tests were used for
analysing data and it includes descriptive statistics, correlation and regression analyses
to determine listed companies under the Colombo stock exchange are apply dividend
policy system. The results of the study provided to guide evidence that the dividend
policy measures are not significantly correlated with earnings per share and dividend
pay-out as dividend policy, return on equity and return on assets as firm performance
measures.

18
 Ajanthan, (2013) has considered dividend pay-out and profitability in Sri Lanka
for doing his study. The study came up with findings that are of salient importance to
scholars investigating dividend issues in the Sri Lankan context. The study observed
that dividend pay-out has a significant impact on the profitability of listed firms in Sri
Lanka. That is an increase in the financial well-being of a firm tends to positively affect
the dividend pay-out level of firms. Furthermore he found that there is a significant and
a positive relationship between revenue and profitability of firms. Conversly he found
that there is a significant and a positive relationship between total assets and the
profitability of firms. Also all independent variables have significant impact on
profitability of the hotels and restaurant companies in the Colombo Stock Exchange
(CSE) for period of 5 years by using regression and correlation analysis. This analysis
were indicated that dividend pay-out was a crucial factor affecting firm’s performance.

2.5 Summary

The literature review is focused on searching previous studies to get the assistance for
conducting this dissertation. This chapter includes theoretical literatures about dividend
and dividend pay-out and dividend policy. Empirical literature findings, many
arguments and different types of relationships regarding the relationship between the
dividend pay-out and firm performance are also mentioned here. Many studies reflected
that there is a positive relationship between dividend pay-out and firm performance.
Some studies argued that there is a negative relationship and few studies argued that
there is no significant relationship.

19
 CHAPTER 03
METHODOLOGY
3.1 Introduction
The purpose of this study is to investigate what the relationship is between the dividend
pay-out and firm performance of Sri Lankan ten manufacturing firms listed in Colombo
stock exchange (CSE) for the period of seven years from 2009 to 2015. This chapter
focused on the methodology of this study. The content of methodology applied for this
study is method of data collection, population, sample and sampling techniques, and
measurement of variables and method of data analysis. Furthermore, the measurement
of variables will also be discussed below.

3.2 Data Collection

This study is a quantitative study. This study is based on the secondary data which
published financial statements of ten manufacturing firms listed on CSE in Sri Lanka
from 2009 to 2015. Especially income statements and statements of financial position
are used to extract the data. These raw data were processed to achieve the objectives of
this study.

3.3 Sample of the Study

In any economy manufacturing firms are important firms relevant to economic

development. Onanjiri and Korankye, (2014) discovered that the manufacturing firms
play a key role in employment generation as well as Gross Domestic Product (GDP)
growth. Further they stated that dividend decision is important for both investors and
corporations.

Dividend is considered as a distribution among their shareholders and it can be

in cash or by issuing of additional shares. Paying cash dividend or issuing shares will
depend on the inappropriate profit level or excess cash amount in the company.
Dividend payment is generally met in a firm by its earnings and cash flow. When the
cash surplus exists which is not needed by the firm, then the top management expects
to pay out some or all of those surplus earnings as cash dividends. The management
decides what proportion of the earnings should be invested and what proportion should
be distributed among their shareholders as dividends payment. While the top
management taking this decision they consider available investment opportunities as
well as increasing future earnings. Therefore the financial managers want necessary

20
information to take right decision. High dividend pay-out is an indication and a clear
evidence that the company is generating from their operations (Abdul & Muhibudeen,
2015).

Dividend or profit allocation decision is one of the important decisions in

finance field. Because dividend decisions are important for determining what funds
flow to investors and what funds are retained by the firm for investment. Dividend
policy is a very important one in the current business environment. Because it remains
one of the most important financial policies not only from the viewpoint of the firm,
but also from the shareholders, consumers, employees, regulatory bodies and the
Government (Uwuigbe et al., 2012).

Dividend policy has a significant influence on the firm performance. It is

important as a strategy for the firm to adopt in distributing income among their
shareholders (Onanjiri & Korankye, 2014). According to the above reasons,
manufacturing industry was selected for this study because of its great impact on
economy and for the managers and investors to get dividend pay-out information for
taking decisions and formulating policies.

When considering CSE 294 firms have been listed in the CSE in Sri Lanka and
firms have been classified under the 20 business sectors. There are 37 listed firms under
the manufacturing industry and 10 manufacturing firms have been selected within seven
years from 2009 to 2015 for doing this study.

In this study, to select those listed manufacturing firms, simple random

sampling was used. Firstly, all the manufacturing firms in CSE were listed orderly
based on their market capitalization. For the purpose of conducting this study, those
manufacturing firms must be listed before the study period. Therefore, the next step
was to remove the listed manufacturing firms which had not any annual reports for the
period of 2009-2015 from the list. Then the random numbers were assigned to each
element in the listed manufacturing firms by using the second column of the table of
random number. After assigning the random numbers, the ten listed manufacturing
firms with the high and low random numbers were selected to gather reliable data.

The appendix 1 shows the listed manufacturing firms, selected listed

manufacturing firms and their market capitalization. At the time of selecting the ten
listed manufacturing firms, the percentage of market capitalization of listed

21
manufacturing firms was 6.29% of total market capitalization. The selected listed
manufacturing firms represent 24% of the market capitalization of total market
capitalization of all listed manufacturing firms on CSE. However the selected sample
represents 24% of the population and the rest 76% has been neglected. The findings of
dividend pay-out and firm performance can’t be used 100% to take the correct decision
about the whole manufacturing industry.

Appendix 1: Listed firms, Selected Listed Firms and Market Capitalization

3.4 Measurement of Variables

This study consists with two main variables as dividend pay-out and firm performance
of the manufacturing sector. Dividend pay-out is considered as an independent variable
and firm performance is considered as a dependent variable. The firm size is used as a
control variable. Dividend pay-out ratio shows what amount of dividend is paid to
shareholders by a firm and, return on assets and return on equity ratio represent the firm
performance. Total assets represent the firm size. By using all the ratio mentioned above
expect to investigate their effect on the relationship between dividend pay-out and firm
performance in listed manufacturing firms in Sri Lanka. Table 3.1 represents all
relevant proxies of each variable. They are very significant in measuring each variables
in this study.

3.4.1 Measurement of dividend pay-out

Dividend pay-out is considered as an independent variable in this study. Number of

ratios had been used to measure the dividend pay-out in different types of studies. The
dividend pay-out ratio is used to measure the dividend pay-out in this study.

3.4.1.1 Dividend pay-out ratio (DPR)

Dividend pay-out ratio is implied the dividends paid by a company from its earnings or
profit. And the dividend pay-out ratio measures the percentage of net income that is
distributed among shareholders of the firm as the dividends during the year. Dividend
pay-out ratio is calculated by dividend per share by dividing earning per share.
Dividend per share is calculated by amount of dividend pay-out of shareholders by
dividing number of shares outstanding. Earnings per share is calculated from the
amount after deducting dividends of preference shares from profit after tax by dividing
number of outstanding shares. Some previous studies have used dividend pay-out ratio

22
for measuring dividend pay-out of the firms (Ouma, 2012; Uwuigbe et al., 2012;
Velnampy et al., 2014).

3.4.2 Measurements of firm performance

The firm performance is considered how companies will use its resources to make or
earn profit.Firm performance is considered as the dependent variable in this study.
There were lot of ratios which were used to measure the firm performance in different
types of studies. Therefore ROA and ROE are used for measuring the firm performance
in this study.

3.4.2.1 Return on assets (ROA)

The Return on Assets ratio is considered as a firm performance ratio. It measures the
net income produced by total assets during a period by comparing net income to the
average of total assets. Otherwise it means how efficiency a firm can manage its own
assets to produce profit within the year. ROA is calculated by profit after tax by dividing
total assets. Some previous studies have been used ROA as dependent variable to
measure, how it effects to firm performance in the firm (Amidu, 2007; Hasan et al.,
2015; Obembe et al., 2014; Velnampy et al., 2014).

3.4.2.1 Return on equity (ROE)

The return on equity ratio is a firm performance ratio. And it means the ability of a firm
to generate profit from its investments of shareholders in the company. ROE is
calculated by profit after tax by dividing total shareholders’ equity. Some previous
studies have used ROE for measuring firm performance of the firms (Amidu, 2007;
Osegbue et al., 2014; Salehnezhad, 2013; Uwuigbe et al., 2012; Velnampy et al., 2014).

3.4.3 Control Variable (Firm size)

There are numbers of factors affect the dividend pay-out and firm performance. Many
studies have used the control variables and literatures of those studies have viewed
significant of the control variables. In this study firm size of the manufacturing firms is
used as a control variable and it examines the relationship between the dividend pay-
out and firm performance of the listed manufacturing firms in Colombo Stock
Exchange. Some studies have used firm size as a control variable to measure its
influence on the firm performance (Ajanthan, 2013; Obembe et al., 2014; Uwuigbe et
al., 2012). Previous studies have used various kinds of measurements for measuring the

23
size of the firm. This study has selected the Total Assets (TA) of the manufacturing
firms to measure the firm size.

Table 3.1: Variables, Proxies and Measurements

Variables Proxies Measurements

Dividend per Share

Dividend Pay-out Dividend Pay-out DER = *100
Earning per Share

Profit after Tax

Return on Equity ROE = *100
Total Equity

Performance

Profit after Tax

Return on Assets ROA = *100
Total Assets

Control variable Firm size Total Assets

3.5 Method of Analysis

This study explores how dividend pay-out influence the firm performance of listed
manufacturing firms in Colombo Stock Exchange in Sri Lanka during from 2009 to
2015. This study consists of descriptive statistical analysis, correlation analysis and
multiple regression analysis for achieving the objectives of this study. The descriptive
statistical analysis is used to investigate the behavior of every variables and this analysis
consists of mean, standard deviation, maximum value and minimum value of each
manufacturing firms. Correlation analysis is used to identify the relationship between
independent and dependent variables. The multiple regression analysis is applied to
measure the influence of dividend pay-out on firm performance of Sri Lankan listed ten
manufacturing firms. Finally, ANOVA analysis is used to investigate the significant
differences among the manufacturing firms.

24
Table 3.2: Regression models

M1 ROA = β0 + β1DP +β2FS +ε

M2 ROE = β0 + β1DP +β2FS +ε

Where,

β0 = Constant Value β2 = Coefficient of Firm Size

FS = Firm Size β1 = Coefficient of Dividend Pay-out

ε = Error Terms DP = Dividend Pay-out

3.6 Summary
This chapter explains how the sample selected and gathered the data to achieve the
objectives of this study by using analytical techniques. Methodology Chapter is
mentioned that the sample is comprised of ten listed manufacturing firms selected as
the sample to gather data for the period of seven years. And the secondary sources are
used to collect data. Especially annual reports of individual manufacturing firms were
used. The independent variable measures the dividend pay-out by using Dividend Pay-
out ratio and Return on Assets as well as Return on Equity ratios are used to measure
the firm performance. In this study, firm size is used as a control variable to examine
the effect on financial performance. In the section of data analysis, it is mentioned that
multiple regression analysis is used to find a relationship between two variables.

25
 CHAPTER 04
DATA PRESENTATION AND ANALYSIS
4.1 Introduction

The purpose of this chapter is to present and analyze the data that has been extracted
from secondary data sources. The data analysis is employed to assess the impact of
dividend pay-out on firm performance in Sri Lankan manufacturing firms and to assess
the significant differences of the selected manufacturing firms. This chapter presents
descriptive analysis, correlation analysis, multiple regression analysis and ANOVA
analysis to achieve those objectives.

4.2 Descriptive Analysis

The descriptive statistics, which consist of the mean, the standard deviation (SD), and
the minimum and maximum values of all the selected variables are presented in Table
4.1, 4.2, 4.3 and 4.4. Figure 4.1 depicts the behavior of the variables.
45.0

40.0

35.0

30.0
PERCENTAGE %

25.0 ROA
20.0 ROE
15.0 DPR
10.0

5.0

0.0
2009 2010 2011 2012 2013 2014 2015

FINANCIAL YEAR
Figure 4.1: DPR, ROE and ROA ratios of manufacturing firms

According to the figure 4.1 the DPR and ROE ratios were declining from 2010 to 2014.
DPR and ROE ratios were rapidly increasing in 2009-2010 and 2014-2015 in
manufacturing industry. ROE shows a strong profitability as 15.4% in 2010. It was
declined up to 2011. When considering ROE and ROA ratios were starting to gradually
increasing from 2015 as well as the DPR ratios were starting to rapidly increasing from
20015. It is clear that all the three ratios have same behavior and it can be seen

26
interrelationships among those ratios. It shows that, DPR is also decreased when
decreasing the ROA, ROE and DPR is also increased when increasing the ROA, ROE.

Table 4.1: Descriptive statistics of DPR 2009-2015

DPR

Firm Mean Std. Devi Min Max

Firm 1 7.6657 4.1413 0.0000 12.3800

Firm 2 12.2527 2.4174 8.6600 15.5300
Firm 3 8.9457 12.8121 0.0000 32.2100
Firm 4 13.7557 8.4109 0.0000 25.0000
Firm 5 18.2485 7.0529 6.9541 28.1900
Firm 6 22.6795 2.4520 19.4856 26.0300
Firm 7 10.1487 7.2789 0.0000 18.8900
Firm 8 10.7271 10.4814 0.0000 25.0900
Firm 9 7.6428 8.3638 0.0000 22.4800
Firm 10 22.3284 6.5501 11.6500 30.4991

Total 13.4398 9.0060 0.0000 32.2100

The table 4.1 shows the mean, standard deviation, minimum and maximum value of
the DPR. The industry average of the DPR is 13.44% and four manufacturing firms
maintain their DPR above the industry average. Manufacturing firm 4, 5, 6 and 10 are
those firms and other all manufacturing firms maintain their DPR below the industry
average rate. It indicates that industry dividend pay-out is 13.44% of the profit after
tax. When considering the mean and standard deviation of DPR, there are huge gap
between mean and standard deviation as 13.43% and 9.01% respectively. Standard
deviation is based on the distance from the mean of DPR. It measures how concentrated
the DPR around the mean and the more concentrated the smaller standard deviation.
When considering the table 4.1 shows a large standard deviation means that the values
of DPR are farther away from the mean. Furthermore the large standard deviation
means the variation is large. It is not good for a firm that the increasing of gap in mean
and standard deviation. Therefore the firm is in a risky situation as occurred the

27
considerable high fluctuations in the firm. The top management should pay their highly
attention for this risky situation. Due to this risky situation the new investors will be
limited to attract to the firm and some existing investors in the firm always will try to
leave from the firm.

The maximum DPR value as 30.49% represents the firm 3 as well as it

represents highest standard deviation. The maximum value indicates that, the
manufacturing firm’s attention to pay highest dividend amount for their investors.
Minimum value of DPR is 0.00 and manufacturing firms 3, 4, 7, 8, and 9 represent
minimum value. The 4.1 table indicates that the current level of the DPR is not an
adverse effect for the manufacturing industry in Sri Lanka. Because some firms prefer
to pay more dividends and some firms don’t prefer to pay dividends. Here some firms
get in to a good position and gain enough or high profits as the increasing of the
investment and shareholders willingness with the firms as its high dividend pay-out.
Therefore the business condition is standard continually. Thus paying more dividends
may be a problem to the firm also. Because considerable huge cash flow annually goes
away from the firms as dividend payment.

Table 4.2: Descriptive statistics of ROE 2009-2015

ROE

Firm Mean Std. Devi Min Max

Firm 1 15.8934 16.8459 -18.0469 31.5672

Firm 2 10.4510 2.8433 6.4963 15.0100
Firm 3 8.3859 9.4269 0.2494 26.0936
Firm 4 6.8167 5.7135 2.6263 19.0021
Firm 5 17.5959 11.4384 6.8200 41.3113
Firm 6 23.2417 13.1918 10.9364 40.0807
Firm 7 3.2048 10.3329 -16.5491 13.8475
Firm 8 4.6515 12.1908 -19.1652 19.7770
Firm 9 3.2521 6.5242 -5.1072 15.7298
Firm 10 13.7482 8.8247 4.3755 31.4521

Total 10.7241 11.6924 -19.1652 41.3113

28
The table 4.2 shows, the mean value of ROE in the manufacturing industry over the
seven year period is 10.72%. It indicates that the industry earns 10.72% on total equity.
Four manufacturing firms maintain their ROE higher than the industry average while
all other firms couldn’t reach to their industry average. It may be cause to occur low
dividend pay-out. Because they don’t have sufficient profits to distribute dividend
among their shareholders.

Maximum and minimum values are showed 41.31% and -19.16% as firm 5 and
firm 8 respectively. It indicates that the minimum and maximum values of the ROE
show the higher range between -19.31% and 41.31%. It illustrates that, some firms are
more profitable and some firms earn losses through their business within the same
business sector. Furthermore ROE indicates 11.69% variation over the period.

Table 4.3: Descriptive statistics of ROA 2009-2015

ROA

Firm Mean Std. Devi Min Max

Firm 1 4.8086 3.3361 -2.3425 7.9426

Firm 2 4.6683 1.9569 4.6841 10.3055
Firm 3 5.1829 6.2124 0.1255 16.9455
Firm 4 3.4567 2.5788 1.2007 8.2882
Firm 5 10.5851 8.4640 3.3569 28.8371
Firm 6 13.3123 8.2842 5.1403 23.9532
Firm 7 2.2053 6.4579 -9.6696 9.3816
Firm 8 3.4901 7.2625 -9.9216 12.2929
Firm 9 2.4632 4.6489 -3.7999 10.8868
Firm 10 7.7273 5.4957 1.9276 18.7605

Total 5.9710 6.5015 -9.9216 28.8371

When considering ROA in the table 4.3, industry mean value of ROA is 5.97% in
manufacturing industry in Sri Lanka. Four manufacturing firms maintain their ROA
above the industry average rate. Manufacturing firms 5, 6 and 10 are those firms and
other all manufacturing firms maintain their ROA below the industry average.

29
However the minimum and maximum values of ROA are -9.92% and 28.83%
respectively. All firms have positive mean value of ROA and ROE. Therefore this
situation may be a favorable opportunity to the manufacturing firms. Because they can
attract the more investors to the firms and retain existing investors in the firms.

Table 4.4: Descriptive statistics of TA 2009-2015

TA (Billion)

Firm Mean Std. Devi Min Max

Firm 1 15.2586 2.5184 11.9921 19.8846
Firm 2 32.5368 9.6391 19.8727 48.7214
Firm 3 10.2395 0.5744 9.1774 10.8717

Firm 4 10.1370 4.8854 5.0457 18.2685

Firm 5 39.8712 15.4562 20.7219 57.1402
Firm 6 83.3649 40.3114 40.0142 139.4896
Firm 7 6.5913 1.0983 5.8129 8.9623
Firm 8 22.7456 8.6670 9.8115 31.2796
Firm 9 10.7995 1.1062 8.8950 11.8514
Firm 10 95.3200 25.6900 74.1350 147.5995

Total 32.6866 34.0865 5.0457 147.5995

Table 4.4 shows the mean, standard deviation, minimum value and maximum value of
the total assets. Manufacturing firm 10 represents a maximum value of TA and
manufacturing firm 4 represents the minimum value of TA value. The industry average
of the mean is 32.6866 and three manufacturing firms maintain their TA above the
industry average of mean. Manufacturing firm 5, 6 and 10 are those firms and other all
firms maintain their TA below the industry average of mean.

The lowest TA may cause to occur above negative and low values of ROA.
Conversely the highest TA may cause to occur the high value of ROA. Manufacturing
firm 6 reports the highest standard deviation as well as it maintains their standard
deviation above the industry standard deviation and all other firms maintain their
standard deviation below the industry standard deviation.

30
4.3 Correlation Analysis

It is a more important technique that can be used to identify the association between
two variables. In this study correlation analysis is carried out to evaluate the
relationship between dividend pay-out and firm performance. Dividend pay-out is
measured by DPR and firm performance is measured by ROA and ROE. The following
correlation matrix in the table 4.5 illustrates the correlation between dividend pay-out
and firm performance and firm size.

Table 4.5: Correlation Matrix- Testing for Association

Variable DPR ROA ROE FS

DPR 1 0.532 ** 0.514 ** 0.519 **

Sig. 0.000 0.000 0.000
ROA 0.532 ** 1 0.915 ** 0.284 *
Sig. 0.000 0.000 0.017
ROE 0.514 ** 0.915 ** 1 0.279 *
Sig. 0.000 0.000 0.020
FS 0.519 ** 0.284 * 0.279 * 1
Sig. 0.000 0.017 0.020
**significant at 1%, * significant at 5%, * **significant at 10%

The table 4.5 shows the correlation results of the independent and dependent variables.
The objective of the correlation analysis is to find out the relationships between
independent and dependent variables. The correlation value between DPR and ROE is
0.514. It indicates that there is a significant and a positive relationship between DPR
and ROE at the 1% significant level in the manufacturing industry in Sri Lanka. The
correlation value between DPR and ROA is 0.532 and it indicates a significant and a
positive relationship between above two variables at the 1% significant level.

The DPR has a statistically significant effect on FS according to the value 0.519
at the 1% significant level and it indicates significant and a positive relationship
between above variable. The ROE has a statistically significant association with FS
according to the value 0.279 at the 5% significant level and it shows that there is a
significant and a positive relationship. The correlation value between ROA and FS is
0.284 at the 5% significant level and it indicates that there is a significant and a positive

31
relationship. The correlation value between ROE and ROA is 0.915 at the 1%
significant level and represents that there is a significant and a positive relationship.

The correlation matrix shows a significant and a positive relationship in the DPR
with ROA, ROE at the 1% and 5% significant level. When considering above figures
more relationships have showed strong relationship strength (P<0.05) and several
relationships have showed moderate relationship strength (P>0.05). When considering
the above relationships, the manufacturing firms are properly handled and practiced
their dividend policy.

4.4 Normal Distribution

The figures 4.2 and 4.3 illustrate the normal probability plots for each model. It includes
that the models are in satisfaction level and analysis the findings are acceptable level.
The normal probability plots of the residuals indicate whether the standardized
residuals might have come from a normal distribution. A normal probability plot of the
standardized residuals indicates of whether or not the assumption of normality of the
random errors is appropriate.

Figure 4.2: Scattered diagram of M1 Figure 4.3: Scattered diagram of M2

4.5 Hetroskedasticity and Linearity Analysis

Through the figures from 4.4 to 4.9 scatter plots the two assumptions which are the
random errors have constant variation and the random errors have zero means of the

32
models are tested at the same time. According to the above scatter plots, it can be
identified that the points in un-patterned mode and are fluctuated randomly around
zero. The plots are not violated the assumptions of zero means and constant variance
of the random error.

Figure 4.4: Residual plots of M1 Figure 4.7: Residual plots of M2

F Figure 4.5: Residual plots of M1 Figure 4.8: Residual plots of M2

33
F Figure 4.6: Residual plots of M1 Figure 4.9: Residual plots of M2
4.6 Regression analysis

Regression analysis is an important and more advance statistical technique to identify

the effect of the given variables. This study selected the multiple liner regression
models. This approach used to test the impact of dividend pay-out on firms
performance in manufacturing firms during seven year period from 2009 to 2015 in Sri
Lanka. The following table 4.5 shows the effect of regression for the each model.

Table 4.6: Output of regression M1 and M2

M1 M2

Dependent ROA ROE

Variable Beta Std. Error Sig Beta Std. Error Sig

DPR 0.527 ** 0.087 0.000 0.506 ** 0.159 0.000

FS 0.100 0.023 0.935 0.016 0.042 0.897
R Square 0.284 0.264
F Value 13.260 ** 0.000 12.040 ** 0.000
**significant at 1%, * significant at 5%, * **significant at 10%

The multiple regression analysis was carried out to analysis the influence of each
independent variables (DPR, FS) on dependent variables (ROA, ROE). The
relationship between the independent and dependent variables can be illustrated trough
34
the M1 and M2 models. M1 represents the regression result of examining the
relationship between DPR, firm size measured by TA and firm performance measured
by ROA of selected listed manufacturing firms in Sri Lanka. M2 shows the regression
result of examining the relationship between DPR, firm size measured by TA and firm
performance measured by ROA of selected listed manufacturing firms in Sri Lanka.

When considering F value of M1 is 13.260 at the 1% significant level and F

value of M2 is 12.040 at the 1% significant level. These two models indicate that the
independent variables (DPR, FS) can explain the impact level of the dependent
variables (ROA, ROE). These M1 and M2 models are accepted as the significant
models at the 1% significant level.

The R square of the M1 and M2 are 0.284 and 0.264 respectively. The R square
result of M1 revealed that 28.4% of the variance in the ROA can be explained using
the DPR and FS. The R square result of M2 revealed that 26.4% of the variance in the
ROE can be explained using the DPR and FS. Thus, there are some other factors for
the change of ROA and ROE except DPR and FS. So according to the M1 model, the
change of DPR and FS is 28.4% and the effect is 71.6% from other factors to the change
of ROA. The M2 model, the change of DPR and FS is 26.4% and the effect is 73.6%
from other factors to the change of ROA.

The meaning of coefficient is, how will change the dependent variables, when
independent variables increased by one unit. When considering about the coefficient of
the above two models, coefficient of M1 and M2 are 0.527 and 0.506 respectively at
the 1% significant level. M1 model indicates that if DPR and FS increased by one unit,
ROA will increased by the 0.527 units. M1 model indicates that if DPR and FS
increased by one unit, ROE will increased by the 0.506 units. When considering the
coefficient, M1 has high coefficient and it can effect to change the dependent variable
significantly than the M2. Moreover M1 has significant effect to change the ROA by
using DPR and FS. Therefore M1 is considered as the favorable model than the M2.
When considering about the coefficient of M1 and M2, DPR and FS have positive
relationship with ROA and ROE.

4.7 ANOVA analysis

The table 4.7 shows the result of ANOVA analysis. It shows whether there are statically
significant differences between groups and it compares the means between the groups

35
are interested in and determines whether any of those means are significantly different
from each other.

Table 4.7: Result of ANOVA analysis

Sum of Mean
F Sig.
Square Square
ROA Between Groups 836.219 92.913 2.680 * 0.011
Within Groups 2080.438 34.674
Total 2916.656

ROE Between Groups 2868.846 318.761 2.914 ** 0.006

Within Groups 6564.453 109.408
Total 9433.299

DPR Between Groups 2060.361 228.929 3.884 ** 0.001

Within Groups 3536.095 58.935
Total 5596.456

Firm Between Groups 63826.071 7091.786 26.034 ** 0.000

Size Within Groups 16344.447 272.407
Total 80170.518
**significant at 1%, * significant at 5%, * **significant at 10%

According to the table 4.6, there is a significant difference in ROA (F (9, 69) = 2.680,
P > 0.05) and ROE (F (9, 69) = 2.914, P < 0.05). Moreover there is a significant
difference in firm size measured by TA (F (9, 69) = 26.034, P < 0.05) and DPR (F (9,
69) = 3.884, P < 0.05). The results revealed that DPR, ROA, ROE and FS significantly
differed among the manufacturing firms. Therefore investors should pay attention
when they making the investment decisions as well as top management should highly
pay attention when formulating the dividend policy or change exists dividend policy.

4.8 Summary

This chapter focused on presenting and analyzing the data that has been extracted from
annual reports of individual selected listed manufacturing firms on CSE in the period
from 2009 to 2015. The result of data analysis has been presented by using descriptive,

36
correlation, regression and ANOVA analysis. The descriptive analysis was used to
identify the significant differences in each manufacturing firms. The correlation
analysis was used to identify relationships between dividend pay-out and firm
performance. The regression analysis was employed to assess the impact level of
dividend pay-out on firm performance. The one-way analysis of variance (ANOVA)
was used to determine whether there were any significant differences between the
means of three or more independent groups. The selected manufacturing firms had a
significant and a positive relationship between dividend pay-out and firm performance.

37
 CHAPTER 05
CONCLUSIONS
5.1 Introduction

Manufacturing industry plays a key role in generating gross domestic product and it
directly contributes to the economic development and economic stability. Therefore
manufacturing industry has been considering as an important industry in any country.
This study aims to examine the significant differences of dividend pay-out and firm
performance and to investigate the relationship between dividend pay-out and firm
performance of selected 10 listed manufacturing firms in Sri Lanka from 2009 to 2015.
For these purposes, ten listed manufacturing firms were selected with the number of
observations in 70 as the sample. The descriptive analysis, correlation analysis,
regression analysis and ANOVA analysis are used to achieve the objectives of the
study.

The literatures of the previous studies provide the different types of results about
the relationship between dividend pay-out and firm performance. The most of the
previous studies found that there is a significant and a positive relationship between
dividend pay-out and firm performance. Conversely, there are no sufficient studies
related to this topic and relevant to the Sri Lankan context. However the developing
countries conducted a numbers of studies related to this topic. After reviewing the
literatures of previous studies the dividend pay-out are measured by DPR and ROA,
and ROE are used to measure the firm performance. The TA of the firm is used to
measure the firm size.

5.2 Key Findings and Conclusion

This section presents the conclusion of the overall study. The findings of the regression
analysis, revealed that there is a significant and a positive relationship between DPR
and firm performance variables. It means that when increasing dividend pay-out of
manufacturing firms, firm performance increases. Conversely, firm size reported an
insignificant and a positive relationship with ROA and ROE. It means that when
increasing dividend pay-out and firm size, firm performance increase. These findings
of the study show consistence with findings of the previous studies Amidu, (2007),
Ouma, (2012), Uwuigbe, Jafaru, & Ajayi, (2012), Amidu & Abor, (2006), Arnott &

38
Asness, (2003), Farsio, Geary, & Moser, (2004), Obembe, Imafidon, & Adegboye,
(2014) and Hoberg et al., (2004).

When considering about the results of ANOVA analysis indicated that there is
a significant differences in ROA and ROE as well as DPR and FS among the
manufacturing firms. The results confirmed that firms with a higher ROE and ROA,
the top management distribute higher level of dividends of listed manufacturing firms
in Sri Lanka. Furthermore findings of this study also showed that the manufacturing
firms with better and highly performance tend to pay more dividends to the shareholders
in manufacturing industry.

Finally, this study conclude that there is a significant and a positive relationship
between dividend pay-out and firm performance in the manufacturing industry.

5.3 Implications and Future Research

The study has examine the impact of dividend pay-out of Sri Lankan manufacturing
firms and it revealed there is a significant and a positive relationship between dividend
pay-out and firm performance. It indicates that when increasing dividend pay-out, the
firm performance is increasing. The effective and strong dividend pay-out policies may
be affected for this situation. Therefore these findings suggest that the Sri Lankan
manufacturing firms should formulate more effectively and strongly dividend policies
for paying dividends to their shareholders. Identifying the effectiveness of dividend
pay-out will support to improve the firm performance. Launching an effective and
strong dividend policy will be beneficial to manufacturing firms.

This study based on the manufacturing industry except the remaining 19

business sectors. The findings of this study can’t be used to make decisions about whole
business sectors. Therefore, the future researches should consider about the other
sectors. As a suggestion when presenting the other sectors, the future researchers should
investigate more sectors. Furthermore this study also focused on only listed
manufacturing firms on CSE and didn’t consider non listed manufacturing firms. To
get a better understanding, future researchers should be investigate non listed
manufacturing firms as well. All the listed manufacturing firms are not in the sample.
It is better to use all listed manufacturing firms as the sample.

Conversely variables of this study were selected by using previous researches.

This study suggests that the future researchers should consider other measurements,

39
especially in market based measurements such as dividend yield, earning growth ratio,
earning per share, price earnings ratio and return on sales etc. These findings also
showed that the major factors were firm performance and firm size that affected to the
dividend pay-out of listed manufacturing firms are. The other factors such as legal rules,
capital structure, past dividend payments pattern and tax positions of the shareholders
were not considered. To get the true and fairly decisions, the future researchers should
be paid attention about above factors. This study focused on Sri Lankan manufacturing
sectors only. Future studies can be used to assess the impact of dividend pay-out and
firm performance of South Asian countries.

40
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 APPENDIX

Appendix 1: Listed firms, Selected Listed Firms and Market Capitalization

Market Market
Capitalization Capitalization
of listed of Selected
Manufacturing Manufacturing
firms in the Firms in the
Manufacturing Firm market (%) industry (%)

ABANS ELECTRICALS PLC 0.03 0.47

ACL CABLES PLC 0.27
ACL PLASTICS PLC 0.03
ACME PRINTING & PACKAGING PLC 0.01
AGSTAR PLC 0.06
ALUFAB PLC 0.02
ALUMEX PLC 0.2
BLUE DIAMONDS JEWELLERY WORLDWIDE
0
PLC
BOGALA GRAPHITE LANKA PLC 0.06
CENTRAL INDUSTRIES PLC 0.04
CEYLON GRAIN ELEVATORS PLC 0.18
CHEVRON LUBRICANTS LANKA PLC 1.54
DANKOTUWA PORCELAIN PLC 0.05
DIPPED PRODUCTS PLC 0.22
HAYLEYS FIBRE PLC 0.02
KELANI CABLES PLC 0.11 1.74
KELANI TYRES PLC 0.19
LANKA ALUMINIUM INDUSTRIES PLC 0.04 0.63
LANKA CEMENT PLC 0.05
LANKA CERAMIC PLC 0.14
LANKA TILES PLC 0.24
LANKA WALLTILES PLC 0.23 3.65

xv
LAXAPANA BATTERIES PLC 0.01
ORIENT GARMENTS PLC 0

PELWATTE SUGAR INDUSTRIES PLC 0

PIRAMAL GLASS CEYLON PLC 0.21

PRINTCARE PLC 0.12
REGNIS(LANKA) PLC 0.07
RICHARD PIERIS EXPORTS PLC 0.1 1.58
ROYAL CERAMICS LANKA PLC 0.5 7.94
SAMSON INTERNATIONAL PLC 0.02 0.31
SIERRA CABLES PLC 0.07 1.11
SINGER INDUSTRIES (CEYLON) PLC 0.03 0.47
SWADESHI INDUSTRIAL WORKS PLC 0.07
SWISSTEK (CEYLON) PLC 0.07
TEXTURED JERSEY LANKA PLC 0.93
TOKYO CEMENT COMPANY (LANKA) PLC 0.36 5.72

Total 6.29 23.62

Source: Colombo Stock Exchange (2016 May)

xvi