Determinants of Dividend Policy among Banks Listed on the Ghana Stock Exchange

Edmund Nana Kwame Nkrumah, Deborah Naadu Ofori, Oswin Aganda Anaba, Akoto Linda Serwah


Purpose: The concept of dividend policy has been widely researched by scholars, however, a consensus on the factors that determine dividend policies among firms has not been yet established as findings differ depending on the industry and sector. This study aims to contribute to the stock of literature already available by observing the major factors that affect dividend decisions of banks listed on the Ghana Stock Exchange (GSE). Methodology: The study employed secondary data extracted from published financial statements of the listed banks over a 10year period. Data was also extracted from the 2015 Ghana Banking Survey Report and the 2015 Bank of Ghana annual financial report. The study was conducted on seven banks which were listed on the GSE. The study used a panel data framework constructed from secondary data of the banks between the years 2006 – 2015 using Ordinary Least Squares model to estimate the regression equation. Findings: The findings of the study showed that Returns on Asset (ROA) which represents profitability ratio was significant and a positive predictor of dividend payment among listed banks on the GSE. Other significant determinant of dividend payments include free cash flow, the leverage level of the banks, the banks ratio of non-performing loans to total administered loans (NPL/TA), the average level of inflation and Bank of Ghana’s policy rate (BPR). Number of bank branches (BBR) was found to have no significant relationship with Dividend payment by banks.Study Contribution: The study revealed that NPL/TA and BPR has negative and strong influence on dividend payment among listed banks on the GSE. No relationship existed between BBR and DPS hence the number of branches owned by listed banks does not affect their dividend payments. Banks must therefore improve on their credit risk management techniques to improve profitability in order to maintain sustainable payment of dividends. Bank of Ghana must also maintain lower BPR since high BPR was found to negatively affect payment of dividend.Recommendations: The study recommends that, future studies should include more independent variables, more banks and as well increase the years for the time series data. Future studies can also consider and compare the determinants of dividend payments among banks in Africa.

Keywords: Dividend policy, Banks, Ghana Stock Exchange

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