Factors influencing dividend payout decision evidence from Ethiopian private banks
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Date
2020-12
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Publisher
A.A.U
Abstract
Dividend policy is one of the most controversial issues in modern corporate finance. Even though, many researchers in different countries studied about the determinants of dividend payout decision, the inconclusiveness of dividend theories and empirical studies on the topic has made it one of the most debatable topics for researchers. In Ethiopia, few studies had been done regarding the topics. This study aims at investigating the factors influencing dividend payout decisions and their relationship to dividend payout in Ethiopian commercial private banks. The research considers the influence of six variables, namely, profitability, liquidity, business risk, lagged dividend payment (previous dividend paid), firm size, and stock (number of equity shares issued and outstanding) on the dividend payout ratio. Concerning sample size, all Ethiopian private banks that are consistently paid dividend during the study period are included. The research used quantitative type of research method. Audited financial statement of those selected banks was used to compute ratios of the selected variables. Panel data covering 2014 to 2018 G.C from Ethiopian private banks were analyzed within the framework of fixed effect technique. The findings showed that, as predicted, profitability, liquidity and size were found to be statistically significant factors which positively affect dividend payout decisions of Ethiopian private commercial banks. On the other hand, business risk, lagged dividend payment and stock had no influence in determining the level of dividend payout during the study period. In connection with dividend payment, Bank managers and board of directors should give special attention to the major determinants of dividend payout. Investors who want to invest their money in the dividend paying banks also look in to the major factors that influence dividend payout decision before selecting those banks.
Description
Submitted for Partial Fulfillment of the Requirement for Master of Science in Financial Service
Keywords
Determinants of dividend, Dividend payout, Ethiopian private commercial banks