MANAGERIAL OWNERSHIP AND DIVIDEND POLICY: A CONCEPTUAL REVIEW

Abstract

Business firms often face the problem of allocation of earnings as to whether to distribute among shareholders or retain some portion of the profits for reinvestment. Thus, the payment of dividend depends to a large extent on the corporate governance practice of a firm especially in terms of managerial ownership. This paper is, therefore, aimed at examining the role of managerial ownership in influencing dividend policies of firms particularly in developing economies using a literature-based approach. Several empirical and conceptual works have been examined. It is concluded that firm's dividend policy is one of the most important financial decisions and responsibility of management because dividend is not only a source of income for shareholders, but acts as an indicator to judging the performance of the firm. It is also concluded that managerial ownership plays significant role in dividend policy decisions of firms.