Dividend Policy Case Study of Private Banks of Ethiopia
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Date
2003-02
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A.A.U
Abstract
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.
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Keywords
Dividend Policy, Private Banks