Does Corporate Governance Affect Dividend? Evidence from Firms Listed in the Colombo Stock Exchange under Consumer Staples and Industrial Sectors

Abstract

Corporate governance literature provides contradictory findings on how corporate governance affects dividend payments. Therefore, this study investigates the effect of corporate governance on dividends using annual data from 2016 to 2020 from 51 firms listed under the consumer staples sector and 35 firms listed under the industrial sector on the Colombo Stock Exchange. The corporate governance index comprising of 18 corporate governance best practices categorized under four main governance dimensions was used to measure the level of compliance with corporate governance. The dividend was measured using the dividend yield ratio. The pooled OLS regression analysis was used to assess the effect of corporate governance on dividends while controlling the effects of firm size, profitability, and industry. The findings suggest that corporate governance has no significant effect on dividend payments despite the fact that compliance with corporate governance best practices has been improved from 2016 to 2020.