Impact of Dividend Policy on Corporate Financial Performance in the Finnish Stock Market

Abstract

The recent global events, including the Covid-19 crisis, have introduced significant uncertainties and disruptions in the market, leading to decreased investors’ risk appetite. In such times, stable and well-structured markets with transparent reporting systems and high reputations tend to attract investor interest. The study focuses on the Finnish market, which is known for stability and high credibility among investors. Cur- rent research paper recognizes the importance of dividends as a crucial aspect of a company's payout policy, influencing investors' decisions. To meet the research objectives, quantitative data of 70 Finnish publicly traded dividend-paying companies for the period from 2019 to 2022 was collected from Nasdaq Helsinki. However, by analyzing the data the research aims to provide insights applicable to the broader markets. The Finnish market's resilience and lower exposure to market fluctuations compared to other European markets make it an effective and de- tailed case study for deriving comprehensive and reliable conclusions. While dividends are considered as a stable income source for investors, nevertheless their sustainability cannot be guaranteed indefinitely. Therefore, dividends should not be evaluated in isolation but rather in conjunction with other performance indicators. Implementing correlation analysis and building multiple regression models allowed this research to find significant evidence of a positive relationship between dividends and corporate financial performance metrics represented by Return on Assets (ROA) and Return on Equity (ROE), acknowledging that these indicators are the well-known measures of a company's success. The study contributes to the existing body of knowledge by employing indicators selected across various business sectors and capturing significant market movements.