Meshesha Demie (PhD)Ananiya Seyoum2026-03-032026-03-032025-09https://etd.aau.edu.et/handle/123456789/7796The research evaluates how Dividend Payout Ratio (DPR) and Dividend per Share (DPS) affect private commercial bank performance in Ethiopia during the period from 2005 to 2024. The research addresses financial stability concerns through an unbalanced panel dataset of 10 banks using GLS regression and random-effects models. The research demonstrates a direct negative relationship between DPR and ROE which shows that high dividend payments reduce reinvestment capital thus decreasing profitability. The signaling theory receives support from DPS's consistent positive influence on profitability metrics. The study shows that GDP growth strengthens bank performance but inflation produces only small effects. The research findings demonstrate that Ethiopian banks need to develop strategic dividend management approaches to achieve better performance and reduce financial risks. Banks should maintain a DPR between 30% and 50% to achieve shareholder returns and retained earnings balance while using stable DPS as a signaling tool to boost investor confidence and maintain a leverage ratio between 3:1 to 4:1 for optimal capital management. Banks need to perform regular assessments of their dividend and leverage strategies while maintaining open communication with stakeholders to ensure their policies match stakeholder expectations and economic conditions. The research provides essential guidance to bank regulators and policymakers for promoting sustainable growth in the Ethiopian banking sectoen-USDividend Payout RatioReturn on EquityBank PerformanceEconomic GrowthThesis