Board structure dynamics and shareholders’ wealth the mediating role of dividend policy

Abstract

The overarching aim of this study was to assess the mediating role of dividend policy in the relationship between board structure dynamics and shareholders’ wealth. A sample of thirteen (13) Ghanaian listed manufacturing firms were selected using a census sampling technique. The study employed descriptive and correlational research designs and a quantitative approach anchored on positivists’ paradigm. Fixed effect panel regression technique and Baron and Kenny’s mediated regression procedure augmented by Sobel test were used to achieve the study objectives. The findings revealed that board structure dynamics indicators such as CEO duality, audit committee effectiveness, board size, board composition with the exception of board gender dynamics had statistically significant effect on shareholders’ wealth. Again, dividend policy was also found to have a significant and positive effect on shareholders’ wealth. Finally, dividend policy played a significant partial mediating role in the relationship between board structure dynamics and shareholders’ wealth. It was therefore concluded that a high representation of independent directors, a considerable number of audit committee, an optimum board size and an independent board chair are essential in ensuring a maximized shareholders’ wealth. It was also concluded that Ghanaian investors prefer higher dividend pay-out and regular dividend payment to future capital gains, an indication of a lower risk appetite in investment. Also, ensuring better board structure dynamics to influence shareholders’ wealth is largely contingent on prudent dividend policy decisions. It was therefore recommended that frantic efforts be made to ensure higher representation of independent directors, a considerable audit committee size, an optimum board size, an independent board chair and a higher and regular dividend payments in order to attain a maximized shareholders’ wealth.