Balance sheet and income statement effect on dividend policy of private commercial banks in Ethiopia

Bayelign Abebe Zelalem and Ayalew Ali Abebe

Cogent Economics & Finance, 2022, vol. 10, issue 1, 2035917

Abstract: The study analyzes the impact of balance sheet and income statement on the cash dividends of private commercial banks in Ethiopia. The independent variables employed include liquidity, asset size, leverage, and growth, which are components of the balance sheet, and profitability which is a component of both the balance sheet and the income statement during the period 2010–2020. The generalized moment (GMM) model was used to determine the most important variables that private banks consider when making dividend decisions. In addition, further tests are performed to corroborate the basic findings. Profitability, size, and liquidity are statistically significant characteristics that positively influence the dividend policy of Dashen bank, Wegagen bank, United bank, Lion international bank, Cooperative bank of Oromia, Awash international bank, Bank of Abyssinia, and Nib international bank. Growth and leverage, on the other hand, have a negative and considerable impact on the dividend policy of private commercial banks. The study suggests that the dividend policy of Ethiopian private commercial banks is influenced by both the balance sheet and the income statement. When determining dividend policy, managers of Ethiopian private commercial banks should consider profitability, asset size, liquidity, leverage, and growth.

Date: 2022
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DOI: 10.1080/23322039.2022.2035917

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