Determinants of Dividend Payout: An Empirical Study on Bank Industry in Ethiopia
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Date
2011-06
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Addis Ababa University
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 2010. 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 statistically 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.
Keywords: dividend policy, irrelevant theorem, bird-in-hand theory, tax preference
theory, agency conflict and signaling mechanism
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Keywords
Dividend policy, Irrelevant theorem, Bird-in-hand theory, Tax prefere theory, Agency conflict and signaling mechanism