Determinants of Dividend Payout for Private Commercial Banks in Ethiopia
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Date
2022-02
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A.A.U
Abstract
The main objective of the research is to study the determinants of dividend payout for private commercial banks in Ethiopia. This study considers one dependent variable i.e., dividend payout, and the effect of nine independent (explanatory) variable; bank specific determinant i.e., profitability, bank size, liquidity, lagged dividend, capital expenditure, financial leverage and revenue growth, and macroeconomic determinants, i.e., economic growth and inflation. The study uses multilinear regression model with a financial data set of five-year, from 2015/16 up to 2019/20. For this study, all existing private commercial banks in Ethiopia were selected, which make the study a census. The finding of the study shows that, from bank specific determinants; capital expenditure, financial leverage and revenue growth have a significant effect on dividend payout, while remaining bank specific determinants i.e., profitability, bank size, liquidity and lagged dividend have no significant effect on dividend payout. Furthermore, the finding of the study shows that, from macroeconomic determinants, both economic growth and inflation have no significant effect on dividend payout. The researcher concluded that the results obtained from this study shows both bank specific and macroeconomic variables are not the only determinant of dividend payout, for private commercial bank in Ethiopia. Board of directors and senior management’s behavior toward dividend have significant effect and influence in determining dividend payout. Furthermore, it is also observed that dividend payout is relevant, and it is used as a tool to communicate with existing and potential shareholders, and to send signal about their financial performance to the public as a whole. The researcher proposes possible recommendations that the board of directors in private commercial bank in Ethiopia have to give a special attention to the bank specific and macroeconomic determinants, while they make dividend payout. Understanding the determinants of dividend payout has significant implication on board of directors’ dividend payout decision. In addition, board of directors in private commercial banks in Ethiopia have to have a written guideline, and have to use scientific methodology in determining dividend payout.
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Dividend Payout, Profitability, Bank Size, Liquidity, Lagged Dividend, Capital Expenditure, Financial Leverage, Revenue Growth,, Economic Growth, Inflation, Determinants of Dividend Payout, Private Commercial Banks in Ethiopia