Determinants of Dividend Pay-out Ratio: Empirical Study on Private Commercial Banks in Ethiopia

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This research aims to examine the determinant factors of dividend pay-out policy of the stated private commercial banks in Ethiopia. In this study, seven variables such as lending rate, liquidity, growth, asset size, efficiency, profitability and inflation are taken as potential determinants of dividend pay-out policy. Ordinary least square (OLS) multiple regression model was used on a sample of nine private commercial banks for the period of ten years from 2010 to 2019. Quantitative research approach and descriptive research design is employed. While testing the impact of seven independent variables on the dividend pay-out ratio, we concluded that only three can explain the dividend policy. The results show that dividend pay-out ratio is positively and significantly affected by lending rate, but are negatively affected by liquidity and growth. Asset size, efficiency, profitability and inflation do not have a direct influence on the dividend payments. Thus, Lending rate, liquidity and growth are functioning as the key determinants of dividend pay-out of the listed private commercial banks in Ethiopia. As per the findings in this research existing and potential investors as well as the banks management, board members and policy makes should pay their attention on variables(lending rate, liquidity and growth)since they significantly determine dividend pay-out rate of private commercial banks in Ethiopia.



Determinants of dividend pay-out, commercial banks