Browsing by Author "Selam Tesfaye"

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    The Effect of Dividend Policy on Financial Performance: The Case of Private Commercial Banks in Ethiopia
    (Addis Ababa University, 2025-09) Selam Tesfaye; Tesfa Nega (PhD)
    This study explores the relationship between dividend policy represented by dividend payout ratio and dividend growth rate the financial performance of private commercial banks in Ethiopia from 2013 to 2023. Return on assets (ROA) and return on equity (ROE) were used to assess financial performance. The study’s primary goals were to analyze the influence of dividend policy on bank profitability, examine trends in dividend payouts over the past decade, and evaluate the connection between dividend policy and bank performance. A purposive sampling approach was adopted to select 15 private commercial banks from the National Bank of Ethiopia database, with selection criteria based on data availability, operational history, and consistent dividend payments throughout the study period. Both descriptive and inferential statistical techniques were applied, including fixed and random effects regression models, to identify significant factors affecting financial performance. Additional diagnostic tests were conducted to validate the results. The regression findings indicated that dividend policy variables did not have a statistically significant impact on either ROA or ROE. However, the control variable—the natural logarithm of total assets—was found to have a significant positive effect on ROA, though it did not significantly affect ROE. These results imply that dividend policy is not a key driver of profitability for Ethiopian private commercial banks. Instead, structural elements such as bank size appear to exert a stronger influence on performance. Based on these conclusions, it is recommended that bank management prioritize strategies that foster growth and operational efficiency, while dividend policy decisions should focus on supporting long-term financial sustainability rather than reacting to short-term profitability metrics. Future research should expand the scope by including additional financial and macroeconomic factors to gain a more comprehensive understanding of the elements influencing the financial performance of Ethiopian banks.