Determinants of Dividend Payout: An Empirical Study on Bank Industry in Ethiopia
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Date
2011-06
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A.A.U
Abstract
This paper aimed at investigating the factors determining dividend payout policy in
Ethiopia bank industry. This study used a panel dataset of audited financial statement of
banks between the years of 2006 and 20 I O. Seven hypotheses were investigated using
OLS regression techniques. The models considered the impact of profitability, liquidity,
leverage, firm size, growth, and lagged dividend per share on dividend payout ratios.
Empirical results verified that the main characteristics of firm dividend payout policy
were that dividend payments related strongly and directly to firm size and lagged
dividend per share, but negatively to the liquidity ratio. However, there is no relationship
of profitability, leverage, and growth as independent variables with dividend payout. The
statist ically significant variables may indicate that firms pay dividends with the intention
of reducing the agency problem. Mangers are reluctant to cut dividend. And, negative
relation of liquidity with dividend may indicate inefficient of bank industry. The results
of this study have delivered some insights on the determinant factors of dividend in
Ethiopia.
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Keywords
Bank Industry, Dividend payout