Decisions Affecting Dividend Distribution Policies in Publicly Listed Companies in Finland

This Bachelor’s thesis investigates decisions affecting dividend distribution policies in publicly listed companies in Finland. The purpose of the thesis is to provide insights for investors about various ratios and reasoning of how policies are determined. The research was conducted by sending quantitative webropol questionnaire to 75 publicly listed companies’s management or finance department. In second phase desktop research was performed to 13 companies where financial statements were analysed for 3 year review period from 2019 to 2021. Main emphasis was in dividend policy statements and financial ratio analysis. The findings of the questionnaire were that most dividend policy among respondents was constant dividend policy where annual dividend payments follow company’s performance. Board of directors is decision-making body and dividend amount is approved by annual general meeting. Majority of the respondents thought that change in dividend distribution is effective method to provide company information to shareholders. According to responses the most important factor was level and stability of free cash flow, level of current and expected future earnings and maintaining target capital structure. Research on financial statements discovered that companies explanation for decisions behind dividend policy used is concise. Most used explanation was that dividends were pre determined percentage of group’s earnings per share as long as dividend distribution did not affect on capital structure and growth targets. Dividend distribution followed company’s financial performance. Trend analysis showed how changes in profit for the period and free cash flow affects to distributed dividends. Change in performance was caused by various factors e.g. increased amount of debt, significant investments and market situation. Ratios assisting to understand dividend payments were dividend payout-ratio and dividend yield ratio. Other used performance indicators were current ratio what indicates liquidity and possibility to cover short-term obligations, net profit ratio, debt to equity ratio and return on equity ratio