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The Impact of Ownership Structure on Dividend Payout Policy of
Listed Plantation Companies in Sri Lanka
S.J.M.N.G. Samarakoon
Department of Economics and Statistics, Faculty of Social Sciences and Languages, Sabaragamuwa
University of Sri Lanka, Sri Lanka
DOI:
https://doi.org/10.51244/IJRSI.2025.120800060
Received: 04 June 2025; Accepted: 09 June 2025; Published: 04 September 2025
ABSTRACT
Ownership structure is one of the primary dimensions of corporate governance. The aim of this study is to
examine the impact of ownership structure on dividend payout policy of plantation listed companies in Sri
Lanka during the period 2019-2023. Seventeen listed plantation companies out of all nineteen plantation listed
plantation companies were selected as a sample. Secondary data was obtained from the annual reports of listed
plantation companies, as published on the website of the Colombo Stock Exchange (CSE), Sri Lanka.
The study considers ownership structure as an independent variable, measured through individual ownership
structure, institutional ownership structure and foreign ownership structure. The dependent variable, dividend
payout policy, is represented by the dividend payout ratio. This study used multiple regression and Pearson’s
correlation analysis as the analytical framework.
The Pearson correlation coefficient matrix was used to identify the relationship between the ownership
structure and dividend payout policy of listed plantation companies. The findings indicate a significant positive
relationship between individual ownership structure and dividend payout policy. Conversely, institutional
ownership showed a significant negative relationship with dividend payout. However, correlation coefficient
between foreign ownership structure and dividend payout was not significant, exhibiting a negative but
statistically insignificant relationship between foreign ownership structure and dividend payout.
Multiple regression analysis was conducted to observe how well the dividend payout policy (DPO) can be
explained by ownership structure. The analysis revealed that 13.4% of the variability of dividend payout is
decided by differences in the ownership structure such as ownerships of individual and institutional, and
foreign ownership. Further, the remaining 86.6% of the variability of dividend payout is decided by other
factors that are not included in this model.
Both individual and institutional ownership structures significantly affect dividend payout policy, while
foreign ownership does not. Overall, ownership structure shows a significant influence on dividend payouts,
except in the case of foreign ownership.
The results also reveal that approximately half of the plantation companies were not in a financial position to
pay dividends annually, mainly due to the prevailing economic crisis and the COVID- 19 pandemic during the
years of 2019 – 2023.
Additionally, Sri Lankan listed plantation companies exhibit highly concentrated ownership structures,
predominantly led by institutional investors, followed by individual and foreign ownership structure.
The behavior of institutional, individual and concentrated owners in Sri Lankan listed plantation companies is
associated with the clarifications of signaling, free cash flow and agency theory concerning dividend payouts.
These findings are valuable to regulators for guiding future policies in the Colombo Stock Exchange and to
investors for forecasting firms’ dividend payouts and valuation of their stocks.
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Keywords: Individual ownership structure, Institutional ownership structure, Foreign ownership structure,
Dividend payout policy and Colombo Stock Exchange
INTRODUCTION
Dividend policy refers to the payout policy that a firm follows in determining the size and pattern of
distribution to shareholders over a period of time. The decision of dividend policy is one of the most important
choices taken by the highest management of a company. This decision is impactful to the shareholders of the
company, reinvestment opportunities, growth and valuation of company, and corporate governance. Dividend
policy has been viewed as an issue of interest in the previous literature. To address the issue, extensive
research has been done on dividends and payout policy, determining factors of dividends, link between
dividends and the company performance and issue of agency cost of dividends (Crutchley & Hansen, 1989
Elston, Hofler, & Lee, 2011 Bhattacharyya, 2007) among all.
The signaling theory, free cash flow theory and agency theory are the main theoretical pillars of the dividend
policy. The agency theory describes that the nonexistence of proper evaluation of management activities by
shareholders of a firm leads to providing indirect assistance to its managers.
When a company allocates high dividends that will decline the available liquidity flow for investment and
encourage managers to go for external financing, the external market that they wish to access will monitor the
utilization of funds and evaluate the company engagements. Based on these implications, the agency model
forecasts that dividends are methodically related to the kind of observation by the firm’s shareholders. The
importance of having control over managerial activities by shareholders is emphasized in the agency theory.
Shareholders represent their ownership by way of individual, managerial, institutional and foreign. The
different types of ownership may have a variety of influence over firms’ decisions. Many researchers measured
the influence of ownership structure to dividend policy in developed countries but very few in the emerging
world. A study on the relationship between ownership structure and dividends in Malaysia displays a low
helpful power between ownership structure and dividend policy (Sulong & Nor, 2008).
The findings of the scholars have reported various viewpoints in developed and emerging countries. Though
the impact of ownership structure on the dividend policy is important it has not been tested much in the Sri
Lankan context as an emerging country. Empirical evidence suggests that share ownership in Sri Lanka is
highly concentrated (Samarakoon, 1999; Senaratne & Gunarathne, 2007). The managerial owners, individual
owners, institutional owners, foreign owners and family owners are present in most of the Sri Lankan
companies. These different kinds of owners in a company setting may have different interests with their
authority and expertise. The composition of ownership structure does not influence dividend policy uniformly
over the countries and hence the impact of dividend policy to the ownership structure has been an interesting
topic in the recent past across the countries. Thus, in the context of a developing economy, ownership structure
can play a major role in understanding the dividend policy of a company and in mitigating agency problems.
As an emerging country, in Sri Lanka, doing research under different shareholding patterns and dividend
payout is much more important as it can provide more awareness to corporate companies and the shareholders.
As Sri Lanka is an emerging country the impact of ownership structure towards dividend policy has been
tested in a few studies. Therefore, this research intends to fill that gap by studying the impact of ownership
structure towards the dividend policy by considering the different classes of ownership structures.
Thus, this paper has attempted to answer the following question: Does shareholding pattern in a firm matter for
dividend payout?
It has been argued in the existing corporate theories that payment of dividend provides indirect benefit of
control where the shareholders are not involved energetically in observing the performance of the firm,
struggles that firms pay dividends to overcome the agency problems restricting from the separation of
ownership and control in a firm with compassionate ownership.
Therefore, the main objective of the study is to examine the impact of Institutional Ownership, Individual
Ownership and Foreign Ownership on Dividend Policy of Plantation Listed Companies in Sri Lanka.
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The rest of this paper is organized as follows. Section 2 explains the objectives of the study. Then the 3
rd
section reviews the literature. Sections 4-6 discuss the methodology, analysis and discussion of result and
findings of the study. Section 7 illustrates the summary and recommendation.
Background
The Sri Lankan economy sustained to recover steadily in 2024, following its deepest economic downturn
experienced two years ago. Post-crisis reforms have started showing positive outcomes. Signs of improved
economic activity, partial recovery in purchasing power, and reduced uncertainty are visible. Following the
unparalleled crisis in 2022, the country’s reform programme aimed to correct deep-rooted structural
weaknesses. The need for continued fiscal consolidation was prioritized to achieve debt sustainability while
supporting the economic recovery. Special attention was also given by the Government to uplifting the
incomes of the poor and vulnerable through the execution of the social safety net programme. The Government
and the Central Bank of Sri Lanka have taken brave steps to recover the economy from the crisis. The
implementation of the IMF-EFF programme and debt restructuring efforts were important pillars of this
journey of recovery (Annual Economic Review,2024).
The Sri Lankan economy is categorized as an emerging market economy. As in many other emerging
economies’ policies, economic policy in Sri Lanka designs to expand investment, increase productivity, create
more employment opportunities, and finally, improving residents’ standard of living. While overcoming the
complex challenges associated with the COVID-19 Pandemic, efforts must continue to address the recognized
limitations with an attentive approach, to launch the necessary steppingstones required for sustainable
relationships with deliberate investment partners.
To ensure continued economic development, the Sri Lankan government has made efforts to create an
attractive business environment. The CSE was established in 1985. The CSE has 285 companies representing
20 Global Industry Classification Standard (GICS) as of 31st March 2025, with a Market Capitalization of Rs.
5,606.37 bn (CSE,2025).
In 2021, it was likely that interest rates remained low and that benefits continued to increase to equity markets.
It is significant that while valuation of companies listed on the CSE is well above where they were in mid-
2020, CSE is well below the regional averages and historical peaks. Many issuers also have strong earnings
stories supporting gains in market capitalization as economic policy changes and the Covid-19 pandemic
opened new opportunities.
The new Securities and Exchange Commission of Sri Lanka (SEC) Act No 19 of 2021 empowered the SEC
and the CSE to progress on plans for demutualization of the CSE, which will establish good governance and
management structures required for the operation of an efficient and effective Stock Exchange. The CSE had
immense potential to play a broader role in the recovery and growth story of Sri Lanka and CSE is stepping up.
The CSE forecasts economic growth, supported by debt restructuring and favorable corporate earnings.
The CSE delivered a strong performance in 2024, ranking No.2 in the list of best performing stock exchanges
in Asia with a year-to-date return of 49.66%. Investors responded positively to strengthening economic
indicators while low interest rates provided additional incentives. Robust corporate earnings also strengthened
impetus, providing the resilience needed in an election year.
The equity market displayed a significant performance marked by notable movements in price indices during
2024, alongside a substantial increase in market turnover. As of 31 December 2024, the All-Share Price Index
(ASPI) and Standard & Poor’s Sri Lanka 20 (S&P SL20) index of the CSE recorded a year-to-date growth of
49.7% and 58.5%, respectively (CBSL,2024).
Further, market capitalization increased by 34.1% and stood at Rs. 5,695.6 bn at end 2024 compared to Rs.
4,248.9 bn at end 2023. Meanwhile, CSE recorded an average daily turnover of Rs. 2,240.2 mn in share
trading during 2024, which was a considerable increase compared to Rs. 1,696.2 mn recorded in 2023
CBSL,2024.
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OBJECTIVES OF THE STUDY
Dividend policies are one of the main issues in modern corporate finance. Ownership structure and corporate
governance have significant consequences on investment decisions. Ownership structure and corporate
governance negatively affect payout decisions, while a positive outcome on investment decisions and
financing decisions.
The study analytically observes the relationship between the ownership structure and dividend policy of Sri
Lankan listed plantation companies for the period of 2019-2023.
Research Questions
The present study is aimed to explore the question that “what is the role of the ownership structure of the listed
plantation companies on dividend payout policy?” To gain a perception and comprehend the impact ownership
structure on dividend payout policy of listed plantation company in Sri Lanka, the following questions are
addressed in the study:
To what level ownership structure impact on the dividend payout policy of listed plantation companies in Sri
Lanka?
Is there any relationship between ownership structure and dividend payout policy of listed plantation
companies in Sri Lanka?
Objectives of the Study
The main objective of this study is to explore the impact of ownership structure on dividend payout policy of
listed plantation companies in Sri Lanka. The secondary objective of this study is to discover the relationship
between ownership structures and dividend payout policy.
LITERATURE REVIEW
Kulathunga and Azeez (2016) found that there is an association between ownership structure types and
dividend policy of listed companies in the CSE. They used panel data that were obtained from the annual
reports of seventy-seven companies during the period 2006 -2014. Their regression results indicated that
ownership identity is involved in determining the dividends. They also found that there are negative
associations between institutional, managerial ownership structures and dividend policy and significant
positive association between concentration ownership structures and dividend policy. The firm size, free cash
flow, and future growth opportunity variables are also matter for the dividend policy. The financial leverage
was not an important variable in determining the dividend policy. The institutional, managerial and
concentration owners in Sri Lankan listed companies are supported with the signaling, free cash flow and
agency theory clarifications for dividend payouts.
Both Suganya and Kengatharan (2017) explored the relationship between ownership structure and divided per
share. They wanted to recognize the various factors that were influencing on dividend per share of Sri Lankan
listed companies of manufacturing. Descriptive statistics indicated that the highest mean value falls with
institutional ownership structure among the other ownership structures. Further, their correlation analysis
showed that there is a significant negative relationship between institutional ownership and managerial
ownership structures with dividend per share. Moreover, the foreign ownership structure showed an
insignificant relationship with dividend per share. Finally, based on the regression analysis, the study found
that institutional ownership structure had negative significant impact on dividend per share and managerial and
foreign ownership structures did not have significant impact on dividend per share.
Samarakoon (1999) examined the ownership structure of firms listed in the CSE as at the financial year end
1997/98.Practical evidence suggests that share ownership in Sri Lanka is highly focused.
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A small number of shareholders with large shareholdings control a significant portion of voting rights.
Individual shareholders constitute a relatively large proportion of shareholders, and their equity ownership is
relatively low. Institutional shareholders account for a small proportion of shareholders and their equity stake
is relatively high. Foreign shareholders’ ownership is small. Further most directors hold shares in their
respective firms.
Balagobei and Thiruchchenthurnathan (2016) inspected the impact of ownership structure on dividend payout
policy of listed plantation companies in Sri Lanka. Fifteen listed plantation companies were selected as sample
by using random sample method and secondary data was collected from the annual report of listed plantation
companies in Sri Lanka during the period of 2010-2014.
This study selected the ownership structure as an independent variable which is measured by individual and
institutional ownership structure and foreign ownership structure and dividend payout policy as dependent
variable which is measured by dividend payout ratio. To analyze multiple regressions and Pearson’s correlation
analysis were performed. The results revealed that foreign ownership structure has a significant impact on
dividend payout policy.
The study also found that foreign ownership structure is positive significantly correlated with dividend payout
policy of listed plantation companies. Further individual ownership structure and institutional ownership
structure are not significantly correlated with dividend payout policy. Higher the foreign ownership structure in
listed plantation companies, the higher the dividend payout which is preferable for investors, and it improves
the dividends.
Ramli (2010) studied the relationship between large shareholders and dividend policy of Malaysian listed
companies using panel data from 2002 to 2006.The result shows that companies make higher dividend payout
as the shareholding of the largest shareholder increase. The size of the dividend payout is also larger when
there is a presence of the substantial second largest shareholder in the company. Further, the Tobit regression
results suggest that controlling shareholders does impact the dividend policy of Malaysian listed companies.
The study also observed that companies with higher level of the largest shareholding have higher dividend
payouts. The result shows that companies make higher dividend payout as the shareholding of the largest
shareholder increases. The size of the dividend payout is also larger when there is the presence of the
substantial second largest shareholder in the company. Overall, the study found that large shareholders had
effects on Malaysian dividend policy.
Al-Najjar and Kilincarslan (2016) explored the impact of ownership structure on dividend policy of listed
firms in Turkey. Particularly, it attempts to expose the effects of family involvement (through ownership and
board representation), non-family block holders (foreign investors, domestic financial institutions and the
state), and minority shareholders on dividend decisions in the post-2003 period as its eyewitnesses the main
economic and structural reforms. The paper employs alternative dividend policy measures (the probability of
paying dividends, dividend payout ratio and dividend yield) and uses appropriate regression techniques (logit
and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 ISE-listed
firms (non-financial and non-utility) over a ten-year period 2003-2012.
The practical results show that foreign and state ownership are connected with a less likelihood of paying
dividends, while other ownership variables (family involvement, domestic financial institutions and minority
shareholders) are insignificant in affecting the probability of paying dividends. However, all the ownership
variables have a significantly negative impact on dividend payout ratio and dividend yield. Therefore, the
paper presents steady suggestion that increasing ownership of foreign investors and the state in general
decrease the need for paying dividends in the Turkish market.
The study Bappah et al., (2024) employed the correlation as design covering a period of 10 years (2011-2020)
using a sample of nine (9) industrial goods firms to denote the population of thirteen (13) industrial goods
firms listed on the floor of Nigerian Exchange Group as of 31st December 2020. The sample arrived using
three-stage filters to reject all firms with incomplete data, firms delisted, and firms not listed within the study
period. Multiple Regression technique was used for analyzing the data. The study revealed that investors are
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suggested to pay excessive attention to the profitability of a company and its percentage of foreign ownership
when making investment choices because profitability was found to be significantly sensible between foreign
ownership and dividend policy.
Study Hypotheses
The hypothesis is a provisional statement that shows the estimated relationship between the variables. The
following hypotheses are expressed for this study.
H1: Individual Ownership structure has a significant impact on dividend payout policy
H2: Institutional Ownership structure has a significant impact on dividend payout policy
H3: Foreign Ownership structure has a significant impact on dividend payout policy
H4: Individual Ownership structure is significantly correlated with dividend payout policy
H5: Institutional Ownership structure is significantly correlated with dividend payout policy
H6: Foreign Ownership structure is significantly correlated with dividend payout policy
METHODOLOGY
Research methodology defines research design, research approach, sampling procedure, data sources and mode
of analysis. Research methodology emphasis the research process of tools and procedures to be used.
Data Collection
For this study the secondary data was used to analyze from annual reports of (2019 -2023) of listed plantation
companies in Sri Lanka, which were published by the CSE in Sri Lanka (https://www.cse.lk/).
The sample includes qualifying seventeen plantation companies out of nineteen plantation companies listed in
the CSE. The two omitted plantation companies were without earning profit and paying dividends to their
shareholders during the five-year period. Nine listed plantation companies out of 17 plantation companies are
on the Main Board, while 4 companies are on the Second Board and the balance 4 plantation companies are
on the Diri Savi Board. The duration was critical due to the prevailing Covid -19 global pandemic and
economic crisis in the country. Thus, the researcher had to limit it to five years from 2019 to 2023.
Consequently, the annual dividend was not declared by most of the plantation companies in the sample.
Moreover, 13 plantation companies (76%) did not declare dividends in 2020. Further, about 50% of plantation
companies did not announce dividends for the five-year period. Finally, the selected 5-year period was very
crucial. Further, the selected companies as a sample must be listed in the CSE for at least one year before the
date of the dividend declaration. It enabled the investigator to confirm the condition that dividend and
ownership structure were not exaggerated because of a new listing of companies. The limited rules applicable
for these plantation companies are aligned with their operation and financial reporting. The companies branded
under the default board for more than two consecutive years are also omitted since the data for those
companies were unavailable for the whole sample period.
Table No.1 Sample of Plantation Listed Companies on CSE
No.
Symbol /Code
Listed Plantation Company
1.
AGAL. N000
Agalawatta Plantation PLC
2.
ASPM.N0000
Aitken Spence Plantation Management PLC
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3.
BOGA. N0000
Bogawanthalawa Tea Estates PLC
4.
HAPU.N0000
(Browns PL) Hapugastenne Plantations
PLC
5.
HAPU.N0000
(Browns PL) Udapussellawa Plantation
PLC
6.
CTEA.N0000
Dilmah Ceylon Tea Company PLC
7.
ELPL.N0000
Elpitiya Plantations PLC
8.
HPL.N0000
Hatton Plantations PLC
9.
HOPL.N0000
Horana Plantations PLC
10.
KGAL.N0000
Kegalle Plantations PLC
11.
KVAL.N0000
Kelani Valley Plantations PLC
12.
MADU.N0000
Madulsima Plantations PLC
13.
MCPL.N0000
Mahaweli Coconut Plantation PLC
14.
MAL.N0000
Malwatte Valley Plantation PLC
15.
NAMU.N0000
Namunukula Plantation PLC
16.
TPL.N0000
Talawakelle Tea Estates PLC
17.
WATA.N0000
Watawala Plantations PLC
Source: https://www.cse.lk/
Mode of the Study
The following methods selected to originate the results in this study are based on data analysis.
Table No.2 List of variables
Name of the variable/
acronym
Type of Variable
Method of Calculation
Individual ownership
IDOWS
Dependent variable
Number of shares held by individuals divided by Total
number of shares
Institutional ownership
INSOWS
Dependent variable
Number of shares held by institutions divided by Total
number of shares
Foreign ownership
FGOWS
Dependent variable
Number of shares held by foreigners divided by Total
number of shares
Dividend payout DPO
Independent
variable
Dividend per share Earning per share
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According to the hypothesis developed, this study constructs a regression model for carrying out empirical
analysis. The following regression model has been developed to check the validity of the objectives.
DPO = β
0
+ β
1
IDOWS + β
2
INSOWS + β
3
FGOWS +ε
Where,
β
0
, β
1
β
2
β
3
− Regression co-efficient
IDOWS − Individual ownership
INSOWS − Institutional ownership
FGOWS − Foreign ownership
DPO − Dividend payout
ε − Error term
Method of Analysis
For data analysis descriptive statistics are used to define and review the behavior of the variables in a study.
They refer to the ways in which many observations are reduced to understandable numbers such as averages
and percentages. Inferential statistics are used to draw conclusions about the reliability and applicability of the
findings. To test the research hypotheses; the inferential tests used include the correlation and regression
analysis (Balagobei and Thiruchchenthurnathan,2016).
ANALYSIS AND DISCUSSION OF RESULT
Limitations of the Research
The first limitation of the study includes, both the global Covid -19 pandemic, and the economic crisis of Sri
Lanka which experienced a downturn economy. Consequently, most of the plantation listed companies made
losses during the period. Hence these companies were not able to earn the profit and pay the dividend as
planned. Thus most of the plantation listed companies did not talk about dividends within this time period.
The second limitation is that Udapussellawa Plantation PLC listed company did not compile its annual report
for the year 2022 due to prevailing economic crisis. As the third limitation, the variables such as both
ownerships of family and managerial that were immensely discussed by the previous researchers were not
available as shareholders in the selected sample of listed Sri Lankan plantation companies. Another limitation
is that both plantation companies Dilmah Ceylon Tea Company PLC and Mahaweli Coconut Plantation PLC
did not expand the ownership structure for foreign investors. The next limitation is the two reputed plantation
listed companies were not earning profits as well as not paying dividends during the period. These companies
were omitted from the sample. The Last limitation is five plantation companies were unable to submit/compile
their latest annual reports for the year 2024. Therefore, the duration of the dataset had to be limited to only 5
years.
Results of Descriptive Analysis
Descriptive analysis describes ownership structure characteristics and dividend payout policy prevalent among
listed plantation companies in Sri Lanka. The descriptive statistics used in this study consist of minimum,
maximum, mean, and standard deviation.
Table 03: Descriptive Statistics
Variables
N
Minimum
Maximum
Mean
Standard Deviation
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Individual
ownership
84
.03
.85
.1758
.17958
Institutional
ownership
84
.15
.96
.7998
.17853
Foreign ownership
74
.00
.24
.0278
.05106
Dividend Payout
84
-.53
2.60
.2126
.38798
Source: Author Calculations (2025)
Table No 03 shows descriptive statistics of dependent (Dividend Payout) and independent (ownership
structures) variables used in this study. The dividend payout, measured by the dividend payout ratio, averages
0.2126). This has the minimum value of -0.53 and the maximum value of 2.60 with standard deviation of
0.38798. The individual ownership structure has an average of 0.1758, a standard deviation of 0.17958, and
minimum and maximum values of 0.03 and 0.85, respectively. Institutional ownership structure, which has
averaged 0.7998. It has a standard deviation of 0.17853 and minimum and maximum values are 0.15 and 0.96
respectively. Foreign ownership structure which has averaged of 0.0278. It has a standard deviation of 0.05106
and minimum and maximum values are 0.00 and 0.24 respectively.
Results of Correlation and Regression Analysis
The Pearson correlation coefficient matrix is used to identify the relationship between the ownership structure
and dividend payout policy in this study.
Table 04: Correlation Matrix
IDOWS
INSOWS
FGOWS
DPO
IDOWS
Pearson Correlation
1
Sig. (2-tailed)
INSOWS
Pearson Correlation
-.963
***
1
Sig. (2-tailed)
.000
FGOWS
Pearson Correlation
-.145
-.383
***
1
Sig. (2-tailed)
.217
.001
DPO
Pearson Correlation
.228
**
-.192*
-.111
1
Sig. (2-tailed)
.037
.080
.348
***. Correlation is significant at the 0.01 level (2-tailed).
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**. Correlation is significant at the 0.05 level (2-tailed).
*. Correlation is significant at the 0.1 level (2-tailed).
Source: Author Calculations (2025)
According to Table 04, the correlation coefficient between individual ownership structure and dividend payout
is 0.228**, which is significant at the 0.05 level, signifying a significant positive relationship between
individual ownership structure and dividend payout. At the same time, the correlation coefficient between
institutional ownership structure and dividend payout is -0.192*, which is also significant at the 0.1 level,
indicating a significant negative relationship between institutional ownership structure and dividend payout.
Correlation coefficient between foreign ownership structure and dividend payout is -0.111, which is not
significant at the 0.05 level. This indicates a negative but statistically insignificant relationship between foreign
ownership structure and dividend payout.
The regression analysis is used to determine how well the dividend payout policy (DPO) can be explained by
ownership structure (Individual ownership structure, institutional ownership structure, and foreign ownership
structure). Table 03 represents the regression coefficient between the dependent variable and the independent
variables.
Table 05: Multiple Regression Analysis
ANOVA Table
Model
Sum of Squares
df
Mean Square
F
Sig.
Regression
1.171
3
.390
3.498
.020
Residual
7.587
68
.112
Total
8.757
71
R
2
= 0.134
Coefficients
Model
Unstandardized Coefficients
Standardized Coefficients
t
Sig.
B
Std. Error
Beta
(Con
stant)
-2.303
1.607
-1.433
.156
IDOWS
2.100
.839
.610
2.502
.015
INSOWS
1.962
1.407
.355
1.954
.098
FGOWS
.257
.538
.076
.478
.634
Source: Author Calculations (2025)
According to Table 05, R
2
is 0.134, which shows that 13.4% of the observed variability of dividend payout is
determined by differences in the ownership structure, such as individual ownership, institutional ownership,
and foreign ownership. In addition, 86.6% of the variability of dividend payout is determined by other factors
not depicted in this model. Further Table 05 clarifies the impact of ownership structure on dividend payout
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policy. For individual ownership structure and dividend payout, the t value is 2.502 and p value is .015, which
is less than 0.05. So, individual ownership structure has a significant impact on dividend payout. For
institutional ownership and dividend payout, the t value is 1.954, and the p value is .098, which is less than 0.1.
So, institutional ownership has a significant impact on dividend payout. For foreign ownership structure and
dividend payout, the t value is 0.478 and p value is .634, which is more than 0.05. So, foreign ownership has
no significant impact on dividend payout.
This regression model, which uses the square root-transformed Dividend Payout as the dependent variable due
to non-normality, shows that at 10% significance level, Individual Ownership has a statistically significant
positive effect (β = 2.100, p = .015), Institutional Ownership has a marginally significant positive effect (β =
1.962, p = .098), and Foreign Ownership is having no significant impact (β = 0.257, p = .634), with the model
explaining 13.4% (R² = 0.134) of the variance in the transformed outcome, indicating that as Individual and
Institutional Ownership increase, the square root of the Dividend Payout tends to increase, implying a non-
linear positive relationship in the original scale.
A 0.1 (10 percentage point) increase in the proportion of shares held by individual investors increases the
square root of the Dividend Payout by 0.210 (i.e., 2.100 × 0.1). This translates to an increase in the actual DPO
from:
If initial sqrt (DPO) = 1.5 → DPO = 2.25
After increase: sqrt (DPO) = 1.5 + 0.210 = 1.71 → DPO = 2.93
A 10% increase in individual ownership is associated with an increase in the Dividend Payout from 2.25 to
approximately 2.93, assuming other ownership levels stay constant.
A 0.1 (10 percentage point) increase in institutional ownership increases the square root of DPO by 0.1962.
This translates to an increase in actual DPO:
If sqrt (DPO) = 1.5 → DPO = 2.25
After increase: sqrt (DPO) = 1.5 + 0.1962 = 1.6962 → DPO = 2.88
A 10% increase in institutional ownership corresponds to an estimated increase in the Dividend Payout from
2.25 to approximately 2.88, showing a moderate positive influence.
Finally, the model where the square root of the Dividend Payout is regressed on different ownership types, a
10% increase in the proportion of shares held by individual investors is associated with a rise in the Dividend
Payout from approximately 2.25 to 2.93. In contrast, a similar increase in institutional ownership predicts a rise
from 2.25 to 2.88, both indicating that greater domestic investor presence (especially individuals) is positively
associated with higher dividend payouts. However, the effect of institutional ownership is only marginally
significant and foreign ownership shows no meaningful influence.
Table 06: Hypothesis Testing
No
Hypotheses
Tools
Supported/
Not Supported
H
1
Individual Ownership structure has a significant impact
on dividend payout policy.
Regression
Supported
H
2
Institutional Ownership structure has a significant impact
on dividend payout policy.
Regression
Supported
H
3
Foreign Ownership structure has a significant impact on
Regression
Not Supported
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
Page 743
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a
dividend payout policy.
H
4
Individual Ownership structure is significantly correlated
with dividend payout policy.
Correlation
Supported
H
5
Institutional Ownership structure is significantly
correlated with dividend payout policy.
Correlation
Supported
H
6
Foreign Ownership structure is significantly correlated
with dividend payout policy.
Correlation
Not Supported
Source: Author Calculations (2025)
SUMMARY AND RECOMMENDATION
The findings indicate a significant positive relationship between individual ownership structure and dividend
payout policy. Conversely, institutional ownership showed a significant negative relationship with dividend
payout. However, the correlation coefficient between foreign ownership structure and dividend payout was not
significant, exhibiting a negative but statistically insignificant relationship between foreign ownership structure
and dividend payout.
The multiple regression model, which employs a square root transformation of the Dividend Payout to address
non-normality in the dependent variable, reveals insightful relationships between ownership structure and
dividend behavior.
The analysis revealed that 13.4% of the variability of dividend payout is determined by differences in the
ownership structure, such as individual and institutional ownership, and foreign ownership. Further, the
remaining 86.6% of the variability of dividend payout is decided by other factors that are not included in this
model. Therefore, the next follow up research can be developed further by including other factors.
The results show both individual and institutional ownership structures significantly affect dividend payout
policy, while foreign ownership does not. Overall, ownership structure shows a significant influence on
dividend payouts, except in the case of foreign ownership.
In practical terms, a 10% increase in individual ownership is associated with a rise in DPO between 2.25 to
2.93 approximately while a 10% increase in institutional ownership raises DPO from 2.25 to around 2.88,
assuming all other variables remain constant. These findings indicate that greater domestic ownership,
particularly by individuals, is linked to higher dividend payouts, while foreign ownership does not play a
significant role.
The researcher observed from the annual reports of the listed plantation companies that approximately half of
the plantation companies were not in a financial position to pay dividends annually, mainly due to the
prevailing economic crisis and the COVID- 19 pandemic during the years of 2019 – 2023.
Further, Sri Lankan listed plantation companies exhibit highly concentrated ownership structures,
predominantly led by institutional investors, followed by individual and foreign ownership structure.
The behavior of institutional, individual and concentrated owners in Sri Lankan listed plantation companies is
associated with the clarifications of signaling, free cash flow and agency theory concerning dividend payouts.
These findings are valuable to regulators for formulating future policies in the CSE and to the investors for
forecasting listed plantation companies’ dividend payouts and valuation of their stocks. Examining the impact
of board structures on dividend payout policy would be a stimulating assignment. Nevertheless, that is left for
future research.
INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
ISSN No. 2321-2705 | DOI: 10.51244/IJRSI |Volume XII Issue VIII August 2025
Page 744
www.rsisinternational.org
a
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