Relationship between Macroeconomic Variables and Dividend Payout of Some Listed Firms on the Ghana Stock Exchange Market: A Random Effect Analysis Approach

Abstract

Aim: The objective of this study was to assess the impact of macroeconomic variables such as inflation, interest rate, exchange rate and market capitalization on dividend payout for some of firms listed on the Ghana Stock Exchange (GSE). Methods: The study used data spanning from 2014 to 2019 (six years). Three panel regression models namely the pooled OLS, fixed effect and random effect model were run separately and it was found that the random effect model was robust to the data and so the random effect model of panel-data estimation was used in this analysis. Results: Results from the study reveals that market capitalization (P=.001) and inflation (P=.000) were statistically significant variables that affect dividend payout, though in different directions; market capitalization affects dividend payout negatively whilst inflation affects dividend payout positively. However interest rate (P=.23) and exchange rate (P=.38) were found to be statistically insignificant. Also was found that the model was statistically significant. Conclusion: It was concluded that inflation rate has a positively relationship with dividend payout while market capitalization has a negative relationship with dividend payout to shareholders. However, interest and exchange rates showed no significant relationship with dividend pay-out to shareholders in this study. Recommendation: It will be recommended that policy makers should review the influence of inflation and market capitalization in order to improve on the dividend payout to investors on the GSE.