Determinants Of Dividend Policy Of Banks In Ethiopia

This study investigates the determinants of dividend policy of banks in Ethiopia. Based on thernprevious studies the independent variables; current earning, previous year’s dividend, liquidity,rnleverage, loan loss provision and bank’s age are selected .The panel data for ten years time periodrn(2002-2011) for five banks was collected and analysis through using the Panel Least Square methodrnwith the fixed effect model . The regression result shows that current earning, previous year’srndividend, bank’s age and loan –loss provisions have positive and statistically significant impact onrnthe banks dividend payments where as liquidity has negative impacts and leverage is not anrnimportant variable for the banks dividend decision. Therefore the variables, current earning,rnprevious year’s dividend payment, loan loss provision and age are the major factors that determinernthe banks dividend decision. Unexpectedly liquidity has a negative impact. In Ethiopia, the banksrndividend decisions are highly influenced by their current earning and previous year’s dividendrnpayments. The result is in line with the signalling theory and banks in Ethiopia are attempted tornhave a stable dividend policy.rnKeyword: dividend policy, dividend policy determinants, dividend stability and signaling theory

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