Cell Biology and Development Studies

ABSTRACT

Background: Dividend payout policies are critical in the banking sector to maintain financial stability while meeting shareholder expectations. Identifying the factors influencing these policies is essential, particularly in emerging markets.
Introduction: This study examines firm-specific factors affecting dividend payout ratios (DPR) among private banks in Ethiopia. It focuses on six key determinants: profitability, liquidity, leverage, growth of gross earnings, bank size, and the previous year’s dividend payout.
Methods: A quantitative approach with an explanatory research design was used to analyze data from 11 private banks in Ethiopia, covering the period from 2015 to 2023. The study employed a panel regression model to determine the relationship between the selected determinants and DPR. Diagnostic tests ensured the robustness and validity of the results.
Results: The analysis showed that profitability (coefficient: 0.298), liquidity (0.234), and previous year's dividend payout (0.485) positively influence DPR. Conversely, leverage (-19.289) and growth of gross earnings (-20.925) negatively affect DPR, while bank size has a modest positive impact (0.151). The model accounts for 78% of the variation in DPR among these banks.
Conclusions: The findings underscore the importance of internal factors in determining dividend policies within Ethiopian private banks. Future research should investigate external influences, such as regulatory frameworks and macroeconomic variables, to provide a more comprehensive understanding.

Article History

Received 15 August 2024; Revised 06 September 2024; Accepted 13 September 2024

KEYWORDS

1. Dividend payout ratio
2. Liquidity
3. Private banks
4. Profitability
5. Leverage
6. Financial policies