Accounting and Finance Dissertation

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Determinants of Dividend Payout: An Empirical Study on Bank Industry in Ethiopia
(Addis Ababa University, 2011-06) Kinfe, Theodros; Gebrehiwot, Gebremedihn (Assistant professor)
This paper aimed at investigating the factors determining dividend payout policy in Ethiopia bank industry. This study used a panel dataset of audited financial statement of banks between the years of 2006 and 2010. Seven hypotheses were investigated using OLS regression techniques. The models considered the impact of profitability, liquidity, leverage, firm size, growth, and lagged dividend per share on dividend payout ratios. Empirical results verified that the main characteristics of firm dividend payout policy were that dividend payments related strongly and directly to firm size and lagged dividend per share, but negatively to the liquidity ratio. However, there is no relationship of profitability, leverage, and growth as independent variables with dividend payout. The statistically significant variables may indicate that firms pay dividends with the intention of reducing the agency problem. Mangers are reluctant to cut dividend. And, negative relation of liquidity with dividend may indicate inefficient of bank industry. The results of this study have delivered some insights on the determinant factors of dividend in Ethiopia. Keywords: dividend policy, irrelevant theorem, bird-in-hand theory, tax preference theory, agency conflict and signaling mechanism