Abstract :-

The mere motive for the researchers to seek answers for the query on payment of Dividends by companies and the affecting factors for the payment of Dividends was majorly due to the prevailing issue of problem of Dividends since 1950s.  The study is based to how one of the main components of corporate governance, which is the Board characteristics, has influenced dividend policy. The data for this paper was gathered Banking and Finance sector companies in Colombo Stock Exchange taking the last 5-year figures as a base.

Dividend Decision and Dividend payout were taken into reflection for the measurement of Dividend policy. And the three analytical strategies of Descriptive Statistics, Binary Logistic Regression and Panel Regression were taken as tools of analysis. Descriptive statistics were used to understand the nature of board characteristics in Banking and Finance sector of Sri Lanka. The effect on Board characteristics on dividend decision was expansively defined in Binary Logistic regression. The effect on level of dividend payout through Board characteristics were discussed through Panel Regression.

Descriptive statistics generated a percentage of 18.48% when finding out average of dividend payout for last 5 years. Women on board seemed to show a percentage of 11.86% in Banking and Finance sector. This concludes that board gender diversity is far less in Banking and Finance sector of Sri Lanka with an average Board size of 8.Leverage of 76% was depicted in Bank and Finance sector.

The likelihood to pay dividends is affected positively by women on board, board size, CEO duality, board meetings and firm size. Audit committee size, Board independence and Leverage showed a negative relationship with likelihood of dividend payout. Out of mentioned relationships, women on board, Board size and CEO duality have a significant positive relationship with likelihood of dividend payout.

It is documented that dividend payout of Banking and Finance companies listed in CSE is affected positively by Audit committee size, Board independence, Board meetings and CEO duality. Out of those variables Board independence and CEO duality had significantly positive relationship with the level of the dividend payout. Dividend payout was negatively affected by Board gender diversity and Board size. Negative relationship of Board size was significant at 0.05 significance level.

Keywords— corporate governance, board characteristics, dividend policy, binary logistic regression, panel regression