An Empirical Analysis of Determinants of Dividend Policy: Evidence from the Bangladeshi Private Commercial Banks
Author(s)
Dr. K.M. Zahidul Islam, Md. Nurul Hoque, Tanoy Kumer SahaAbstract:
Dividend payout is among the most significant unresolved issues in modern corporate finance. Several studies have tried to solve the puzzle until now; the results are questionable as to what determines the optimal dividend policy. By applying panel data for a period of 5 years from 2008-2012 this paper attempts to identify the factors influencing the dividend payout ratio of the Bangladeshi commercial banking industry listed in the Dhaka Stock Exchange (DSE). The study applied advanced econometric techniques to identify the determinants of dividend payouts ratio. Among different variants of error component models the fixed effect (FE) specification, upon conducting necessary diagnostic tests, appeared to be relevant for estimation in the present study. This study analyses a range of determinants of dividend policy and the estimated results suggest that corporate tax, anticipated earnings, and profitability are the most influential determinants of dividend payout of Bangladeshi private commercial banks. Overall model is significant and the results of Fixed and Random Effect Models further validate these results.
Key Words: Dividend payouts, Bank profitability, Panel data, Bangladesh, Fixed effect, Random effects.
JEL Classification: G21, C23, G30, G32.