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Dividend policy Case study of Private banks of Ethiopia
(A.A.U., 2003-02) Selam, Ayalew; . P., . Laxmlkantham (Mr.)
A number of studies have been conducted in the area of dividend policy in the developed capital markets. Few researchers also tried to investigate on dividend policy in emerging markets where the financial system is bank centered. This paper explicitly looks into the dividend decision determinants of the four private banks of Ethiopia namely Awash International Bank S.C, Bank of Abyssina S.C., Dashen Bank S.C. and Wegagen Bank S.C. from the year 1996 to 2002. The findings show that given the institutional structure of the banks, the undeveloped form of the financial markets and the age of the banks being in their early stage of growth, dividend decisions are primarily focused on fulfilling legal requirements, i.e., capital adequacy, liquidity and reserve requirements. In addition, the fund needs, the availability and access to external finance, tax, control (protection against dilution), shareholders preference and earnings are among the determinants that are identified to be factors that have dictated the dividend decisions of these banks