Dividend Policy and Bank Performance in Ghana

Abstract

The main thrust of this study is to find out the relationship between dividend policy and performance of banks in Ghana. The study used panel data constructed from the financial statements of 16 commercial banks in Ghana for a period of 5 years, from 1999-2003. These financial statements were obtained from the Banking Supervision department of Bank of Ghana. STATA was used for the data analysis. From the results of the study, the average dividend paid by banks over the study period was 24.65%. Also, it is apparent that banks that pay dividend increase their performance. The results also reinforce earlier findings that leverage, size of a bank and bank growth enhance the performance of banks. The age factor presents mixed results. Generally, the result is in tandem with earlier studies that dividend policy has an effect on firm value.

Dividend Payout, Retention Policy and Financial Performance in Commercial Banks: Any Causal Relationship?

“…For any commercial bank to adopt a policy it must be adequately capitalised to justify continuity of banking activities and hence, persistent future growth, since banks address risk by maintaining a high degree of capitalisation. A priori Expectation: It is expected from this study that 3 1    > 0 (Agyei & Marfo-Yiadom, 2011;Hamid et al, 2016;Ibrahim, 2016). There should be either a uni-directional or bi-directional causal relationship between dividend policy and banks' return.…”

“…Theories such as "a bird in the hand", the signalling hypothesis and the empirical findings of Agyei and Marfo-Yiadom (2011) and Hamid et al (2016) According to Waseem, Saleh, Shukairi, and Mahmood (2011), dividend policy is unstable in the banking sector, but there are two commonly adopted dividend policies in the banking sector: namely, the dividend payout policy and the dividend re-investment plan (Retention Policy). Hence, Performance = f (Dividend payout ratio, Retention ratio)…”

Dividend policy, investment opportunity set, free cash flow, and company performance: Indonesian’s agricultural sector

“…It reflected that an increase in the company's dividend payments would affect the decline in company performance Volume 23, Issue 3, July 2019: 403-417 | 412 | in the following year, while a decrease in the value of dividend payments will affect the performance the following year. These results contradicted those of the research conducted by Agyei & Yiadom (2011), Mai (2010, Ehikioya (2015), Fauzi & Suhadak (2015), Sukendro & Pujiharjanto (2012).…”

“…Several studies have examined the impact of dividend policy on company performance. In line with the concept of signaling theory, Ehikioya (2015), Sukendro & Pujiharjanto (2012), Agyei & Yiadom (2011), Mai (2010, Yegon, Cheruiyot, & Sang (2014) found evidence that dividend policy had a positive effect on company performance. On the other hand, Kahn et al (2016) found that dividend policy harmed company performance.…”

“…Research by Sukendro & Pujiharjanto (2012) showed that the company's policy of not paying dividends affects the company's performance, which is worse than the companies paying dividends. Agyei & Yiadom (2011) also managed to prove that banks in Ghana need to pay dividends in order to reduce agency costs and improve their performance. Mai (2010) also managed to prove that dividend payments affect firm value (profitability).…”