Factors That Influence Dividend Policy: Do Macroeconomic Factors Matter?

Emmanuel Kwame Doffour; Emmanuel Boye Asamoah; Isaac Kwadwo Anim; Eric Agyenim-Boateng

doi:10.37075/FABA.2025.1.10

Authors

Emmanuel Kwame Doffour Department of Accounting, University of Cape Coast, Cape Coast, Ghana https://orcid.org/0000-0001-7285-5575
Emmanuel Boye Asamoah Department of Accounting, University of Cape Coast, Cape Coast, Ghana https://orcid.org/0009-0001-6163-5021
Isaac Kwadwo Anim Department of Accounting, University of Cape Coast, Cape Coast, Ghana https://orcid.org/0000-0002-5138-2307
Eric Agyenim-Boateng Directorate of Finance, University of Cape Coast, Cape Coast, Ghana https://orcid.org/0009-0000-7264-3599

DOI:

https://doi.org/10.37075/FABA.2025.1.10

Keywords:

Dividend Policy, Macroeconomic Factors, Generalized Method of Moments

Abstract

Purpose: This research examines the effects of macroeconomic variables (money supply, interest rates, inflation, and exchange rates) on the dividend policies of firms in the Ghana Stock Exchange.

Design/Methodology/Approach: The study employed panel data from 23 Ghanaian firms from 2010 to 2022. To overcome endogeneity and unobserved heterogeneity, a dynamic two-step difference Generalized Method of Moments (GMM) was used, employing Stata 15 for the analysis.

Findings: The findings also show that money supply, interest rates and inflation have a positive and significant effect on the dividend payout ratio, while exchange rates have a significant inverse effect on the dividend payout ratio.

Practical Implications: These results reveal that macroeconomic factors play a significant part in determining dividend policies in Ghanaian firms. The study has significant implications for corporate managers in the formulation of dividend policy, investors in evaluating the dividend prospects, and policymakers in the realisation of the effects of macroeconomic policies on corporate finance.

Originality/Value: This research provides significant information on the relationship between macroeconomic variables and firms’ dividend decisions in Ghana. It builds on the existing literature by including a wider set of macroeconomic variables, unlike most previous Ghanaian studies that mainly focused on firm-specific factors.

Paper Type: Research Paper

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