ISSN: 2225-8329
Open access
This study explored the determinants of dividend policy, focusing on the roles of liquidity and leverage in Jordan's publicly listed service firms. Utilizing data from 38 companies over the period 2011-2021, this analysis employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to assess the relationships between liquidity, leverage, and dividend policy, with firm size and age as control variables. Findings reveal a significant negative relationship between liquidity and dividend policy, suggesting that Jordanian service firms prefer to retain cash internally. This behavior aligns with the pecking order and agency cost theories, where internal funds are prioritized for operational stability over dividend distribution. In contrast, leverage, particularly long-term debt, shows a positive influence on dividend policy, implying that highly leveraged firms are more likely to pay dividends as a signal of financial health and to reduce agency conflicts. The control variables, firm size and age, also exhibit significant effects on dividend policy, with larger and older firms showing a tendency toward lower dividend payouts, possibly due to their focus on reinvestment and long-term growth. This study contributes to the understanding of dividend policy determinants within Jordan’s service sector, underscoring the strategic roles of liquidity, leverage, and firm-specific characteristics in a developing economy.
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