Previous reliance on the external funds in financing

Previous empirical research have studied in their research that annual company’s level of leverage as an important determinants of the dividend policy decision. It was also believed that leverage level and dividend policy can be as substitute in reducing agency problem (Mui ; Mustapha, 2016). The leverage shown how much the liability level of the company, and associate with the availability of cash in deciding company’s reliance on the external funds in financing future profitable investment (Thi & Trang, 2012) and (Mui & Mustapha, 2016).

Several authors around the world have examined the relationship between leverage and dividend policy, and it shown a mixed result either positive or negative relationship between these two.

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