Determinants of Dividend Policy of Insurance Companies in Ethiopia

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Addis Ababa University


This study seeks to find the determinants of dividend policy of insurance companies in Ethiopia. In order to achieve this objective, the study uses mixed research approach. Panel data covering nine-year period from 2003 – 2011 are analyzed for nine insurance companies. Also in-depth interview is conducted with company officials. The study analyses a range of determinants of dividend policy: Profitability, growth, Liquidity, Size and Leverage of the firm. The random effects technique has been applied to find out the most significant variables used by the insurance companies in making the dividend decisions. The results show that dividend decisions are relevant and profitability and liquidity are the statistically significant factors which positively influence dividend policy of insurance companies in Ethiopia. On the other hand, growth influences dividend policy negatively and significantly. Contrary to theoretical prediction, the study finds that size and leverage are insignificant in influencing the dividend policy of insurance companies in Ethiopia. The study provides evidence that profitability, liquidity and growth are the most important factors that affect dividend policy of insurance companies in Ethiopia. So, Ethiopian insurance companies’ managers should give consideration to profitability, liquidity and growth when they set dividend policy



Insurance, Companies in ethiopia