THE IMPACT OF DIVIDEND PAYMENT POLICY ON THE FINANCIAL PERFORMANCE OF PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

The dividend pay-out policy is one of the most debatable topics within corporate finance and some academics have called the company‟s dividend policy unsolved puzzle. The main objective of this study was to examine the impact of dividend pay-out policy on the financial performance of Ethiopian private commercial banks. To answer the objective of the study, explanatory and quantitative type study was used& the data covered the period from 2010-2018 for the sample of twelve Ethiopian private commercial banks and used secondary data. Bank specific variables were analysed by employing the balanced panel fixed effect regression model and the study used two models for two dependent variables those are net interest margin and return on asset and one independent variable which is dividend pay-out ratio. In addition, the study was used three control variables; they are: liquidity, leverage, and firm size. The result of the study showed that, dividend pay-out ratio has positive and statistically significant impacts on return on asset of Ethiopian private commercial banks whereas dividend pay-out ratio found to be positive and statistically insignificant impact on net interest margin of Ethiopian commercial private banks during the year between 2010 and 2018