THE IMPACT OF FINANCIAL LEVERAGE ON DIVIDEND PAYOUTS: EMPIRICAL EVIDENCE FROM AN EMERGING MARKET IN THAILAND
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Abstract
This research aimed to examine the impact of financial leverage on the dividend payouts of companies listed on the Stock Exchange of Thailand, representing an emerging market context. The study adopted a quantitative research design, focusing on
a sample of 489 firms listed between 2018 and 2022. The debt-to-asset ratio (DAR) and debt-to-equity ratio (DER) were utilized as indicators of each firm’s financial leverage. To analyze the effect of financial leverage on dividend payouts, multiple regression analysis based on panel data was conducted using a fixed-effects model.
The empirical findings indicated that the debt-to-asset ratio, which served as
a proxy for the firm’s financial leverage, had a statistically significant negative effect on dividend payments at the 0.10 significance level. This suggested that firms with higher levels of debt relative to their total assets had a tendency to allocate a greater proportion of their cash flow toward servicing debt and meeting repayment commitments rather than distributing dividends to shareholders. Conversely, the debt-to-equity ratio showed no statistically significant effect on dividend payouts, implying that this structural measure of capital composition may not fully capture the firm’s actual financial burden or liquidity pressure. Regarding the control variables, both profitability and firm growth exhibited statistically significant negative effects on dividend payments at the 0.01 and 0.05 significance levels, respectively. This finding suggested that firms with strong profitability and higher growth potential were more likely to retain earnings to finance future investment and expansion rather than distribute them as dividends. The insights gained from this study can serve as a useful reference for corporate executives and investors in making relevant decisions.
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