Signaling Effects of Dividend Policy for Firm Performance: Evidence for Vietnam Stock Exchange

Abstract

This paper examines whether dividend policy is a signal for firm performance in the future in the case of listed companies on the Vietnamese stock exchange. Using data from year 2005 to 2021, the study provides more empirical evidence that dividend does have a signaling effect on the future corporate performance. Specifically, firms that decide to pay dividend in the previous year outperform than the companies without dividend payments. Moreover, both dividend per share and dividend payout ratio have a positive correlation with the company’s ROA and ROE in the next year. This finding is consistent with the signaling theory for the Vietnamese market, in which the dividend policy would contain useful information on future company performance.