The effects of Dividend Policy on Capital Structure of companies in Cameroon

Abstract

This study is aimed at examining the effects of dividend policy on the capital structure of firms. Linear regression is carried out via a three-stage triple least square method using secondary data on a sample of 444 firms. The results show that dividend policy has a negative effect on capital structure and consequently when dividend increases the level of debt falls. On the other hand, capital structure has a positive effect on dividend policy implying that when a firm resorts to debt it pays more dividends. However, the results are not the same in all the sectors of activity. In the primary sector, capital structure is influenced by financial profitability liquidity, size, tangibility of assets, asset growth, cash flow and tax. In the secondary sector, capital structure is negatively affected by dividend policy and positively by size. While in the tertiary sector, capital structure is significantly influenced by dividend policy.

Keywords: Dividend policy, optimal financial structure, financial profitability, financial leverage

Classification JEL : G32

Paper type : Empirical Research