Determinants of Dividend Policy of Banks in Ethiopia

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title



This study investigates the determinants of dividend policy of banks in Ethiopia. Based on the previous studies the independent variables; current earning, previous year’s dividend, liquidity, leverage, loan loss provision and bank’s age are selected .The panel data for ten years time period (2002-2011) for five banks was collected and analysis through using the Panel Least Square method with the fixed effect model . The regression result shows that current earning, previous year’s dividend, bank’s age and loan –loss provisions have positive and statistically significant impact on the banks dividend payments where as liquidity has negative impacts and leverage is not an important variable for the banks dividend decision. Therefore the variables, current earning, previous year’s dividend payment, loan loss provision and age are the major factors that determine the banks dividend decision. Unexpectedly liquidity has a negative impact. In Ethiopia, the banks dividend decisions are highly influenced by their current earning and previous year’s dividend payments. The result is in line with the signalling theory and banks in Ethiopia are attempted to have a stable dividend policy. Keyword: dividend policy, dividend policy determinants, dividend stability and signaling theory



Dividend policy, Dividend policy determinants, Dividend stability and signaling theory