Determinants of the dividend policy : an empirical study on the Lebanese listed banks

Abstract

Purpose - This paper aims at investigating the factors determining the dividend payout policy in the Lebanese banks listed on the Beirut Stock Exchange. Methodology - To achieve this objective, this study considers the impact of seven variables, namely, profitability, liquidity, leverage, firm size, growth, firm risk and previous year's dividend payout on the dividend payout ratios by using an unbalanced panel dataset of audited financial statement of listed banks between the years of 2005 and 2011. Two models were tested and seven hypotheses were investigated using the OLS and the dynamic panel regressions. Findings - Empirical results show that the dividend payout policies are positively affected by the firm size, risk and previous year's dividends, but are negatively affected to the opportunity growth and profitability. The results obtained might indicate that firms pay dividends with the intention of reducing the agency conflicts. Furthermore, managers take into consideration the stability of dividends while determining the dividend policy. However, the variables that are negatively significant indicate that the Lebanese listed firms prefer to invest their earnings aiming to grow their institutions rather than to pay more dividends. Research limitations - The small sample size with a short time frame and limited resources could have affected the quality of the study's output. Practical Implications - Researchers and investors could use this study as a benchmark for further research and future investments. Originality - This study has delivered some insights on the determinant factors of the dividend policy in the Lebanese listed banks.