Received: 24 September 2018 Revised: 31 December 2019 Accepted: 18 June 2020

DOI: 10.1002/ijfe.2095

RESEARCH ARTICLE

Impact of dividend policy on corporate value: Experiment

in Vietnam

Hung Ngoc Dang1 | Van Thi Thuy Vu2 | Xuan Thanh Ngo2 |
Ha Thi Viet Hoang1

1
Accounting & Auditing Department,
Hanoi University of Industry, 298 Cau
Abstract
Dien street, Bac Tu Liem district, Hanoi, The paper examines the impact of dividend policy on corporate value. Data
Vietnam collection is the result of listed companies on the Vietnamese stock market in
2
School of Banking and Finance, National
the period of 2006–2017 with 2,278 observations. Using the general least
Economics University, 207 Giai Phong
street, Hai Ba Trung district, Hanoi, square (GLS) approach, the authors have identified three factors that have a
Vietnam positive and significant impact on corporate value: dividend payout, profitabil-
ity, and corporate sizes; and one factor that has a negative impact on corporate
Correspondence
Hung Ngoc Dang, Hanoi University of value is the degree of financial leverage. The study found that dividend policy
Industry, Hanoi, Vietnam. has a significant impact on the corporate value of companies that implement a
Email: hungdangngockt@yahoo.com.vn,
dangngochung@haui.edu.vn
higher dividend payout policy. Conversely, firms that do not pay dividends or
pay low dividends do not experience a significant impact of dividend policy on
Funding information corporate value. The results of the study will be meaningful for businesses on
Vietnam National Foundation for Science
and Technology Development dividend policy implementation.
(NAFOSTED), Grant/Award Number:
502.02-2019.302 KEYWORDS
corporate value, dividend policy, GLS model, Tobin's Q, Vietnam

1 | INTRODUCTION views have led to ambiguity and required explicit

A wide variety of studies have been conducted worldwide
to determine the relationship between dividend policy
and corporate value, among which the most notable
research is conducted by Miller and Modigliani (1961).
According to their theory, in terms of an efficient market,
there is no relationship between the dividend policy and
the market value of businesses. However, this theory
shows the existing relationship between investment pol-
icy and firm market value, whereby dividend policies are
not important because they do not affect the value of the
company or the wealth of the owners. There have been a
lot of debates and in-depth researches being conducted in
order to test this theory. While some researchers advocate
this theory (Black & Scholes, 1974; Miller & Rock, 1985),
some other studies objected (Dyl & Weigand, 1998;
Litzenberger & Ramaswamy, 1979). These conflicting
research based on the results of empirical research.
Vietnam's securities market is one of the frontier
markets, approaching the position of an emerging
market in the system of stock markets. Some view that
for marginal markets, corporate value does not depend
on dividend policy but is heavily influenced by inves-
tors' decisions by factors such as information asymme-
try, herd behaviour. Our empirical evidence shows a
more explicit assessment of the dividend policy of
listed firms, and on the other hand, assessing its
impact on the corporate market value with the case
study at a developing country. This study aims to
answer the question: what is the impact of dividend
policy on the corporate value in Vietnam? What are
the appropriate theories on dividend policy and corpo-
rate value for the Vietnamese stock market? Whether
dividend policy with high dividend payout ratio or low

Int J Fin Econ. 2020;1–11. wileyonlinelibrary.com/journal/ijfe © 2020 John Wiley & Sons, Ltd. 1
2 DANG ET AL.
dividend payout has a strong impact on corporate
value?
The remainder of the paper is organized as follows.
Section 2 reviews literature; Section 3 discusses hypothe-
ses; Section 4 presents model and research methods; Sec-
tion 5 shows results; and Section 6 concludes our study.
2 | LITERATURE R EVIEW
2.1 | Theories
2.1.1 | Theory of dividend policy
(Miller & Modigliani, 1961)
Business values are not affected by dividend policy but
depend on the investment decisions. This conclusion of
Miller & Modigliani (M&M) is tied to the assumptions of
an efficient and perfect capital market. M&M also relied
on the effect of customer behaviour to support their con-
clusions. Accordingly, businesses that change their divi-
dend policy may lose some shareholders over other
businesses with more attractive dividend payouts. Thus,
stock prices fall temporarily. However, some other inves-
tors who prefer the new dividend policy would assume
that the shares of the business are underpriced and buy
more shares.
2.1.2 | Tax influence theory
Most economists believe that in a tax-free environment,
investors are unlikely to be interested in receiving divi-
dends or capital gains, but in a tax environment, dividend
payouts can change the value of the company. In prac-
tice, dividend income is often taxed higher than capital
gains. Additionally, the tax levy on capital gains must be
paid only when the investor actually sells the shares.
Therefore, companies are encouraged to retain more
profits for reinvestment and pay a lower dividend and
investors still prefer capital gains rather than dividends.
Thus, Miller and Scholes (1982) and Poterba and
Summers (1984) argued that investors prefer a small divi-
dend payout, which lowers the cost of equity, increases
the value of the stock and maximize business value.
2.1.3 | Risk-averse theory
The risk-averse theory assumes that risk-averse investors
tend to choose dividend income rather than receiving
capital gains from selling stocks. The dividend is a regu-
lar income and considered less risky than potential
earnings from future capital gains. In support of this the-
ory, Gordon (1963) put forward a controversial argument
with M&M theory that a dividend payout today is worth
more than one unit of retained earnings to reinvest in
new projects. As the success rate of the new project in
the future is uncertain, dividends in the future may be
larger but also riskier because of uncertainty and the dis-
count rate used to calculate stock value could go up. Low
dividend increases uncertainty for shareholders, so share-
holders will discount future earnings at a higher rate,
lowering the value of the company and vice versa.
2.1.4 | Customer effect theory
Black and Scholes (1974) divided investors into three
groups: Group 1 comprises the preferred dividend lovers.
The second group comprises those who are indifferent
with dividends and may be there for the purpose of
acquiring the company. Group 3 comprises those who
are not interested in dividend payments, such as individ-
ual investors subject to high-income tax. According to
Black and Scholes (1974), customer effects explain the
impact of taxation and transaction costs over investor
preference on stocks, thereby influencing corporate divi-
dend policy. However, the very existence of transaction
costs and tax differences is not enough to become a gen-
eral theory that explains the determination of dividend
policy.
2.1.5 | Signalling theory
Ross (1977) was the first to explore the theory of signal-
ling based on a fundamental theory by Miller and
Modigliani (1961). The theory states that all company
announcements of paying more dividends are seen as a
signal that the company has more prospects in the future.
A company offering good investment opportunities seems
to want to deliver that message to investors so that it can
make a profit.
2.1.6 | Agency theory
Is further developed in the study of M. C. Jensen and
Meckling (1976), and M. C. Jensen (1986). This theory is
derived from the conflict of interest between the Board of
Directors and the shareholders. In the information asym-
metry environment, this contradiction of interest will
arise agency costs. The Board of Directors may generate
an incentive to invest business excessive cash flow in
activities that may diminish the value of the company.
DANG ET AL.
The study by Rozeff (1982) suggested that dividend policy
could be a tool to reduce agency costs and is the most
practical measure. The more dividends paid, the less free
cash flow remains under the decision of the Board of
Directors. Investors are concerned about this issue, so
they will react positively to dividend increases and vice
versa.
2.1.7 | Pecking order theory
Developed by Myers and Majluf (1984), this theory
explains the company's funding decisions based on asym-
metric information. Based on asymmetric information,
this theory proposed a prioritized financing order by
firstly using retained earnings for reinvestment into the
companies, followed by debt issuance and lastly stocks
issuance if necessarily. This theory helps explain why
companies with high profitability tend to have lower bor-
rowing ratios than others because they have more inter-
nal capital to finance their business activities, whereas
low-profit firms will issue debts because they do not have
enough internal capital for their investment projects.
Debt is topped in the ranking order of external funding.
2.1.8 | Free cash flow theory
M. C. Jensen (1986) deals with the free cash flow hypoth-
esis and argues that dividend policy is used to resolve the
conflict between the Board of Directors and the share-
holders. This theory is considered to be a combination of
signalling theory and agency theory. Accordingly, the
Board of Directors must invest in projects with positive
net present value to ensure the benefits of shareholders.
The rest of the retained earnings if paid in dividends will
reduce the possibility for the business to invest in non-
profit projects. The dividend payment is considered a
good sign of future business prospects (G. R. Jensen,
Solberg, & Zorn, 1992).
2.2 | Literature review
Amidu (2007) studied the value of firms in Ghana for the
period of 1997–2004, with the result that there was a posi-
tive and statistically significant relationship between
business performance (ROA and ROE) and dividend pay-
ments. There is, however, no statistically significant cor-
relation between the Tobin's Q and dividend payments.
Murekefu and Ouma (2012) conducted a regression anal-
ysis based on the data of companies traded at the Nairobi
Kenyan Exchange for the period of 2002–2010. The
3
research results show a positive impact of dividend pay-
ments on the company value. Gul, Sajid, Razzaq,
Farrukh, and Khan (2012) analysed the relationship
between dividend policy and corporate value in 75 compa-
nies in Pakistan from 2005 to 2010. The results show that
the market value of company stocks increased when divi-
dend payments increased. Dogan and Topal (2014)
showed that the market value of the company was nega-
tively correlated with firm size but positively correlated
with the dividend payout ratio.
In addition, Wang, Yu, and Cui (2013) used the ordi-
nary least squares method (OLS) to measure the effect
of dividend policy to the value of 132 Chinese real
estate companies with data from 2007–2010. The results
indicate that dividend policy affects the value of
researched firms. At the same time, corporate value has
a positive correlation with cash dividends and negative
correlation with share dividends. Cash dividends have a
greater impact on the business value than stock divi-
dends. On the other hand, compound dividend policy
has a stronger impact than individual policies. Mean-
while, Hu and Chen (2012) developed a new view of
dynamic dividend policy in the Chinese market using
the 2002 to 2011 data. The two researchers estimated
the partial adjustment model and concluded that con-
sistent dividend policy is positively related with the
value of the business.
Anton (2016) reviewed the impact of dividend policy
on the corporate value on the sample size of 63 non-
financial companies listed on the Bucharest Stock
Exchange between 2001 and 2011. The study results
found that the dividend payout ratio had a positive effect
on corporate value after stabilizing other specific vari-
ables of the business. Moreover, financial leverage and
business size have a positive impact on corporate value.
Nwamaka and Ezeabasili (2017) examines the possible
impact of dividend policy on corporate value. This study
included 10 companies for the period of 1995–2015. The
method was the OLS method, the firm's value measured
as market price per share, the independent variables in
the model are earnings per share (EPS) and dividend per
share. Research shows the relevance of dividends as a sig-
nalling model and demonstrates that corporate value is
greatly influenced by dividend policy. Budagaga (2017)
examined the impact of dividend payments on the value
of listed companies on the Istanbul Stock Exchange
(ISE). The research was adjusted according to the resid-
ual income approach based on the valuation model by
Ohlson (1995). By examining various statistical tech-
niques, fixed effects are applied on panel data for 44 enter-
prises listed on the ISE for the period of 2007–2015.
These findings show a significantly positive relationship
between the dividend payments and the business value.
4 DANG ET AL.
3 | HY POTH ES E S
3.1 | Dividend policy
Dividend policy (dividend payout ratio) is an important
factor affecting business value. Theoretical and empiri-
cal studies by Murekefu and Ouma (2012), Gul
et al. (2012), Wang et al. (2013), Hu and Chen (2012),
Dogan and Topal (2014), Nwamaka and
Ezeabasili (2017), Budagaga (2017) show that dividend
policy is positively correlated with corporate value.
However, according to the study by Amidu (2007), there
is no statistically significant correlation between the
Tobin's Q coefficient and dividend payments. The pro-
posed research hypothesis is as follows:
Hypothesis 1 Dividend payout ratio has a positive and
statistically significant impact on a firm's value.
Profitability of a business: A highly profitable busi-
ness is often traded at a better price (Allayannis &
Weston, 2001). Moreover, businesses with high profit will
attract investment. The study by Mohamad and
Saad (2010) for 172 companies listed in the Malaysian
stock exchange also made similar conclusions. Therefore,
ROA is also considered as an important factor affecting
the value of enterprises. The proposed research hypothe-
sis is as follows:
Hypothesis 2 Profitability of enterprises has a positive
and statistically significant impact on the firm's value.
Business size: There is quite a bit of evidence that
large firms are more likely to adopt risk management
than small firms (Anton, 2016; Colquitt, Hoyt, &
Lee, 1999; Dogan & Topal, 2014; Liebenberg &
Hoyt, 2003; Liow, 2010). Studies by Lang and Stulz (1994)
and Allayannis and Weston (2001) have shown the oppo-
site relationship between firm's size and firm's value. The
magnitude of the impact on corporate value has many
different experimental results that can be attributed to
the “size” and “complexity” of the enterprise. Meanwhile,
the study of Mule, Mukras, and Nzioka (2015) stated that
size does not affect the firm's value. The proposed
research hypothesis is as follows:
Hypothesis 3 The size of the business has a positive and
significant impact on the firm's value.
Financial leverage: Some studies of capital structure
theory such as Durand (1952) stated that the cost of
debt is often “cheaper” than the cost of equity. As the
result, companies often use more debt to extend the
value of the business. In addition, the theory of Modi-
gliani & Miller (1958 and 1963) also shows that debt
ratio has a positive relationship with corporate value.
Financial leverage, however, will cause financial dis-
tress and reduce the value of the business, even leading
to bankruptcy. Therefore, when businesses use debt at a
high level, both creditors and shareholders will require
businesses to have better risk management. The authors
Hoyt and Liebenberg (2011) and Anton (2016) agree
that there is a positive relationship between debt and
corporate value. The proposed research hypothesis is as
follows:
Hypothesis 4 Financial leverage has a negative and sta-
tistically significant impact on the firm's value.
4 | M O DE L S A ND RE S E A R C H
METHODS
4.1 | Variables
4.1.1 | Measurement of corporate value
If the business is an investment property, the value of the
business depends on the income that the investors gener-
ate. Therefore, the corporate value is the total present value
of all income that is likely to be generated in all business
activities. In other words, the corporate value is the existing
benefits and the potential benefits a business can create
and is expressed in the form of values that we can calculate
and determine through the appropriate method and pricing
model. Enterprise valuation has many different calculating
approaches. In general, these methods focus primarily on
the following two perspectives:
4.1.2 | Performance-based viewpoint
This is a method of determining the value of an enterprise
from the capital movement with the expectation of increas-
ing a firm's value. According to the study by La
Rocca (2010), with a sample of 36 studies from 1988 to
2006 selected for the survey, about 33% of the studies used
ROA, ROE values and 67% of the study used Tobin's Q and
other indicators such as EPS, EVA, P/E, etc. representing
corporate value. The Tobin's Q, according to the study by
Chung and Pruitt (1994) and Lin (2010) is defined as:
Total market value of equity + Net debt
Tobin’s Q = : ð1Þ
Total book value of firm assets
DANG ET AL. 5

4.1.3 | The market-based view
La Porta, Lopez-de-Silanes, Shleifer, and Vishny (2000),
Ball, Kothari, and Robin (2000), Morck, Shleifer, and
Vishny (1988) have determined that the impact of busi-
ness information on stock prices is less in countries
where the law does not protect the rights of investors.
Since stock prices often reflect the expectations of inves-
tors for the company, its market value can significantly
affect the true value of a company as long as the com-
pany can provide enough relevant information. The
smaller SD of the stock price is, the lower the investment
risk. The volatility of stock prices, however, has a signifi-
cant impact on investment decisions, thus studying the
market value of the stock is a measuring method of the
company's value.
4.2 | Research model
Based on the previous study model, the author uses the
following model:
Model 1 : Tobin0 Qit = β0 + β1 ðDyieldit Þ + β2 ðDpayoutt Þ
+ β3 ðDPSRit Þ + β4 ðROAit Þ + β5 ðSIZEit Þ + β6 ðDLFit Þ + εit :
Model 2 : PRICEit = β0 + β1 ðDyieldit Þ + β2 ðDpayoutt Þ
+ β3 ðDPSRit Þ + β4 ðROAit Þ + β5 ðSIZEit Þ + β6 ðDLFit Þ + εit :
Symbols and methods of the variables are presented
in Table 1.
The study looked at factors influencing dividend policy
collected from listed companies on Ho Chi Minh stock
exchange for 12 years from 2006 to 2017 with 2,278 observa-
tions and used the regression model based on tabular data.
Regression methods include Pooled OLS regression
methods, the fixed-effects model (FEM) and the random-
effects model (REM). After choosing the appropriate
regression method for the model, the author conducted a
model selection test and a defect assessment test of the
selected model. In the case where the model assumes the
defect is violated, the author will proceed with the gen-
eral least square (GLS) method.
5 | RESULTS A ND DISCUSSION
In the period of 2006–2017, the number of firms paying
cash dividends ranged from 57.4 to 82.2%, with an aver-
age of 68.3%. Thus, about two-thirds of firms pay cash
dividends (see Table 2).
Statistical data (Table 3) show that the average
Tobin's Q coefficient is 1.129 so that the firm's market
price is larger than its book value. The average stock mar-
ket price was 17,013 Vietnam Dong per share, the highest
was 195,700 Vietnam dong per share and the lowest was
670 Vietnam dong per share. Average dividend payout
ratio was 12.1% compared to par value, the lowest among
the surveyed enterprises was 0% and the highest was
110%. Businesses usually pay cash dividends from 1 to
2 times a year, but in particular, there are companies that
pay dividends five times a year. Return on assets (ROA)
is 6.80% on average; the average logarithm of total reve-
nue (SIZE) is 13.54; firms' degree of financial leverage
(DFL) is 47.1% on average.
Figure 1 shows the dividend per share ratio (DPSR) of
listed companies on Ho Chi Minh City Stock Exchange
during 2006–2017. Dividend policy of firms in the period
of 2006–2010 had a noticeable change; however, in the
period from 2011 to 2017, dividend policy was less vola-
tile and tended to decrease slightly.

TABLE 1 Calculations and expected signs of variables

Types of Variable Expected

No. Variables variables code Calculating method signs
1 Corporate value Dependent Tobin'Q TobinQ = (Total market value of equity + net
debts)/Total book value of assets
2 Dependent PRICE Price = business stock price at end of year t
3 Dividend per share Independent DPSR Total dividend payments/Total outstanding (+)
ratio shares × stock price
4 Return on assets Controlled ROA Net income/Total assets (+)
5 Business size Controlled SIZE Ln (Total revenues) (+)
6 Degree of financial Controlled DLF Total debt/Total assets (−)
leverage

Source: Authors' establishment.

6 DANG ET AL.

T A B L E 2 Total number of firms

Firms not paying cash dividends Firms paying cash dividends
paying dividends in cash yearly
Year Numbers Percentage (%) Numbers Percentage (%) Total
2006 22 31.4% 48 68.6% 70
2007 18 17.8% 83 82.2% 101
2008 25 20.7% 96 79.3% 121
2009 25 35.2% 46 64.8% 71
2010 33 16.3% 169 83.7% 202
2011 70 30.3% 161 69.7% 231
2012 85 35.6% 154 64.4% 239
2013 82 33.6% 162 66.4% 244
2014 90 36.0% 160 64.0% 250
2015 80 33.1% 162 66.9% 242
2016 84 33.5% 167 66.5% 251
2017 109 42.6% 147 57.4% 256
Total 723 31.7% 1,555 68.3% 2,278

Source: Data extracted from financial statements and calculated by Stata 13.0 by authors.

Variable Obs Mean Median SD Min Max

TABLE 3 Descriptive statistics
results
Tobinq 2,278 1.129 0.970 0.668 0.1 8.5
Price 2,278 17,013 11,060 18,984 670 195,700
DPSR 2,278 0.121 0.100 0.130 0 1.1
ROA 2,278 0.068 0.060 0.091 −1.72 0.6
Sizedt 2,278 13.543 13.480 1.385 8.63 18.32
DLF 2,278 0.471 0.490 0.212 0 1.06

Source: Data extracted from financial statements and calculated by Stata 13.0 by the authors.

F I G U R E 1 Dividend policy of firms in period of 2016–2017. Source: Data extracted from financial statements and calculated by Stata
13.0 by the authors [Colour figure can be viewed at wileyonlinelibrary.com]

The matrix of coefficient correlation between vari-
ables is used to analyse and examine the probability of
occurrence of multi-collinear phenomena between vari-
ables in the model. Based on the data (Table 4), the likeli-
hood of multi-collinearity in the regression model is
small, as most of the correlation coefficients between var-
iables are relatively small, none exceeds 0.6.
Based on the regression results (Tables 5 and 6) with
dependent variables being Tobin's Q and stock price, to
consider and select the appropriate model between the
three regression methods, the authors used the F and
Hausman tests. The F test showed p-value >
F = 0.000 < α = 5%, so with the significance level of 5,
we rejected H0. That means the data collected indicating
DANG ET AL. 7

TABLE 4 Correlation coefficient

Tobinq PRICE DPSR ROA SIZE DLF
matrix
Tobinq 1
PRICE 0.4989* 1
DPSR 0.3990* 0.4114* 1
ROA 0.4068* 0.3727* 0.5832* 1
SIZE 0.1511* 0.2967* 0.1690* 0.1121* 1
DFL −0.1709* −0.1502* −0.2259* −0.3800* 0.3233* 1

Note: t statistics in brackets, *p < .05.

Source: Data extracted from financial statements and calculated by Stata 13.0 by the authors.

TABLE 5 The regression model results with Tobin's Q as dependent variable

VIF POOL FEM REM GLS

DPSR 1.61 0.672*** 0.155 0.672*** 1.167***
ROA 1.79 0.853*** 0.510*** 0.853*** 1.738***
SIZE 1.24 −0.0327** −0.112*** −0.0327** 0.0513***
DLF 1.4 0.0293 0.289*** 0.0293 −0.200***
_cons 1.429*** 2.455*** 1.429*** 0.267**
N 2,278 2,278 2,278 2,278
R2 0.4324 0.4542 0.4324
LM test Wald χ (4) = 106.58
2
Wald χ2 (4) = 106.58 Wald χ2 (4) = 798.91
p > χ2 = 0.0000 p > χ2 = 0.0000 p > χ2 = 0.0000
F test F(4, 2017) = 14.67
p > F = 0.0000
Hausman test χ2 (4) = 318.56
p > χ2 = 0.0000
Wooldridge test F(1, 252) = 9.143
p > F = 0.0028
Modified Wald test χ2 (257) = 4.2e+06
p > χ2 = 0.0000

Note: t statistics in brackets. *p < .1, **p < .05, ***p < .01.
Source: Data extracted from financial statements and calculated by Stata 13.0 by authors.

that the FEM modelling approach is appropriate and
POOL method are inappropriate because of the existence
of fixed effects in each enterprise over time. After
selecting the FEM model instead of the POOL method,
the authors, in turn, evaluated the existing table data
based on FEM and REM models. From them, the authors
will go to the Hausman test to make a decision whether
to choose the FEM or REM models. Hausman's test
results are presented in Tables 5 and 6, which shows that
p-value > χ2 = 0.0000 < 5%; thus, there is sufficient basis
for rejecting the H0 hypothesis. FEM is more appropriate
than a REM. However, before analysing in detail the fac-
tors affecting the dividend policy, the authors will use the
following tests: variance test, autocorrelation and make
necessary corrections to overcome restrictions of the
model.
To test whether the variance is altered, the authors
used the Breusch and Pagan test under the assumption
H0: there is no change in variance and H1: there is a
change in variance. The test result for the p-value
received is .0000 < α (5%), which implies that H0 is the
change in variance. The Wooldridge test is used to test
whether self-correlation exists for regression models. The
test result for the value p-value = .0000 < α = 0.05,
assuming H0 is rejected, that is, autocorrelation occurred
to overcome the detected defects of the model by the GLS
method. The results presented in Tables 5 and 6 are the
results that have been corrected for the defects of the
8 DANG ET AL.

TABLE 6 The regression model results with PRICE as dependent variable

VIF POOL FEM REM GLS

DPSR 1.63 33,550.8*** 33,550.8*** 33,550.8*** 36,261.6***
ROA 1.75 21,241.4*** 21,241.4*** 21,241.4*** 30,583.6***
SIZE 1.33 4,945.4*** 4,945.4*** 4,945.4*** 3,833.1***
DLF 1.42 −8,663.9*** −8,663.9*** −8,663.9*** −11,478.0***
_cons −51,138.4*** −51,138.4*** −51,138.4*** −35,973.3***
N 2,278 2,278 2,278 2,278
2
R 0.4008 0.3253 0.4008
LM test Wald χ (4) = 455.64
2
Wald χ2 (4) = 455.64 Wald χ2 (6) = 704.87
p > χ2 = 0.0000 p > χ2 = 0.0000 p > χ2 = 0.0000
F test F(4, 2017) = 75.80
p > F = 0.0000
Hausman test χ2 (6) = 19.90
p> χ2 = 0.0029
Wooldridge test F(1, 252) = 27.677
p > F = 0.0000
Modified Wald test χ2 (257) = 1.7e+07
p> χ2 = 0.0000

Note: t statistics in brackets. *p < .1, **p < .05, ***p < .01.
Source: Data extracted from financial statements and calculated by Stata 13.0 by the authors.

TABLE 7 Regression results according to the dividend payout ratio

GLS—Tobin'Q GLS—PRICE

Low dividend payout High dividend payout Low dividend payout High dividend payout
ratio (≤10%) ratio (>10%) ratio (≤10%) ratio (>10%)
DPSR 0.271 0.674*** −16,509.3 48,125.4***
ROA 0.624*** 3.709*** 31,760.5*** 38,453.0***
SIZE 0.0356*** 0.0705*** 2,880.7*** 4,841.3***
DLF 0.245*** −0.320*** −9,981.4*** −11,188.6***
_cons 0.315*** −0.067 −22,024.4*** −54,237.6***
N 1,042 1,236 1,042 1,236

Note: t statistics in brackets. *p < .1, **p < .05, ***p < .01.
Source: data extracted from financial statements and calculated by Stata 13.0 by the authors.

model. Based on Tables 5 and 6 (GLS model), the results
show the impact of the dividend policy on corporate
value.
The dividend policy has a positive impact on the
value of enterprises and is statistically significant at 1%.
The results of the study are in line with hypothesis H1,
which is in line with the signalling theory and the free
cash flow theory. The results of this study are consistent
with studies by Murekefu and Ouma (2012), Gul
et al. (2012), Wang et al. (2013), Hu and Chen (2012),
Dogan and Topal (2014), Anton (2016), Nwamaka and
Ezeabasili (2017), Budagaga (2017) but not in line with
the study of Amidu (2007).
We further seek to answer the question of how high divi-
dend payout ratio would affect the firm's value. We divide
the research sample into two groups; the first one is the one
with low dividend payout ratio (dividend payout ratio ≤ 10%,
which is the median value of the share payout ratio of enter-
prises). The second group is the companies with a high divi-
dend payout ratio (dividend payout ratio > 10%).
DANG ET AL.
The results of GLS regression are presented in
Table 7, which shows that the low non-cash payout ratio
does not affect corporate value when measured in Tobin's
Q and stock prices. Conversely, the high dividend payout
ratio has a positive impact on the firm's value and is sta-
tistically significant at 1%.
Regression results show that ROA is positively corre-
lated and statistically significant to firm's value when
measured by Tobin's Q and share price. The results of
this study are consistent with the findings of Allayannis
and Weston (2001), Mohamad and Saad (2010), Hung,
Ha, and Binh (2018).
Enterprise size factor (SIZE) is positively correlated
and statistically significant to firm's value when mea-
sured by Tobin's Q and stock price. The results of this
study are in line with the original H3 hypothesis,
which is consistent with the findings of Colquitt
et al. (1999), Liebenberg and Hoyt (2003), Dang, Tran,
and Nguyen (2018), but contrary to the study of Lang
and Stulz (1994), Allayannis and Weston (2001),
Dogan and Topal (2014), Anton (2016).
The DFL is inversely related to business value and is
statistically significant in all models when measuring a
firm's value using Tobin's Q and stock price. The results
of this study are in line with the original H4 hypothesis,
which is consistent with the results of Durand (1952),
Modigliani and Miller (1958), Modigliani and
Miller (1963), but not similar to the results of the study
Hoyt and Liebenberg (2011), Anton (2016).
6 | C ON C L U S I ON S
The paper looks at factors influencing dividend policy by
collecting data from listed companies on Ho Chi Minh
stock exchange for 12 years from 2006 to 2017. The
results show three factors that have a positive and signifi-
cant impact on corporate value: dividend payout, profit-
ability, and corporate sizes; and one factor that has a
negative impact on corporate value is the DFL. The study
found that dividend policy has a significant impact on
the corporate value of companies that implement a
higher dividend payout policy. Besides, the cash dividend
payment of listed companies on Ho Chi Minh City Stock
Exchange was less volatile and tended to decrease during
the study period. Dividend policy is measured by the ratio
of cash dividends, which has a positive impact on the
value of enterprises and the statistical significance at 1%.
Based on the research results, we propose some recom-
mendations, specifically as follows:
Firstly, businesses need to maintain stability and
dividend policy with a high dividend payout ratio (over
9
10% per year) because this is a very important factor
affecting the value of the business. Also, there is a posi-
tive correlation between profitability and business
value. This shows a consensus over the theories set
forth above. Thus, enterprises need to improve their
profitability by saving money, effectively using existing
equipment; at the same time, to expand the size,
maintaining the growth rate as they are factors that
help increase the corporate value.
Secondly, enterprises should expand the form of joint
ventures with partners both at home country and abroad
to acquire more assets, especially fixed assets with mod-
ern technology to operate as well as learn to improve
management levels, utilizing assets and markets of part-
ners to enhance corporate value. In addition, businesses
need to manage the costs associated with sales and busi-
ness management as well as manage well receivables in
order to improve operational efficiency.
Thirdly, financial leverage influences the value of the
business. This means that with corporates that rely on
borrowing, the value of the business will be reduced. As
the result, businesses need to be cautious in mobilizing
loans, giving priority to owners' equity and stock issuance
for business financing.
For investors, results of the study on the impact of
dividend policy, profitability, business size, financial
leverage on the corporate value of listed companies on
Ho Chi Minh City Stock Exchange will show them some
practical explanation of those influences. From then,
looking at dividend policy, investors will have the ability
to predict the profitability of the business in order to
make appropriate investment decisions.
ACKNOWLEDGEMENTS
This research is funded by Vietnam National Foundation
for Science and Technology Development (NAFOSTED)
under grant number 502.02-2019.302.
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are avail-
able from the corresponding author upon reasonable
request.
ORCID
Hung Ngoc Dang https://orcid.org/0000-0002-6666-
4905
Van Thi Thuy Vu https://orcid.org/0000-0003-1577-
1505
Xuan Thanh Ngo https://orcid.org/0000-0002-1464-
3942
Ha Thi Viet Hoang https://orcid.org/0000-0002-1764-
828X
10
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How to cite this article: Dang HN, Vu VTT,
Ngo XT, Hoang HTV. Impact of dividend policy on
corporate value: Experiment in Vietnam. Int J Fin
Econ. 2020;1–11. https://doi.org/10.1002/ijfe.2095