Determinants of Dividend Policy in Ethiopian Private Banks
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Date
2017-01
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Addis Ababa University
Abstract
The dividend policy is one of the most debatable topics within corporate finance and some
academics have called the company’s dividend policy unsolved puzzle. Even though a lot
of researches regarding dividends have been conducted, there is no uniform answer to the
question: what are the determinants of the companies’ dividend policy? Therefore,the
researcher of this study decided to conduct a study regarding the determinants of dividend
policy of Ethiopian private banks using bank specific factors and macro variables. The
main objective of this study was to identify the determinants of dividend policy of
Ethiopian private banks. To answer the objective of the study, explanatory and descriptive
study used&the data covered the period from 2000-2015 for the sample of sixEthiopian
private banks and used secondary and primary data. Both bank specific and
macroeconomic variables were analyzed by employing the balanced panel fixed effect
regression model andthe study used dividend policy as a dependent variable and seven
independent variables; they are profit, leverage, liquidity, retained earnings, loan loss
provision, lagged dividend payout, economic growth rate and inflation rate. The result of
the study revealed that profit, leverage, and lagged dividend payment have positive and
statistically significant impacts on dividend policy of Ethiopian private banks while
retained earnings, loan loss provision, inflation have negative and statistically significant
impact on dividend policy of Ethiopian private banks whereas liquidity and economic
growth rate were found to be statistically insignificant and have no any impact on
dividend policy of Ethiopian private banks.
Keywords: Dividend policy, Ethiopian private banks, bank specific factors, macro
variables
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Keywords
Dividend policy, Ethiopian private banks, Bank specific factors, Macro variables