Title: Examining bank-specific determinants of the dividend payout ratio of Sub-Saharan Africa banks: the panel GMM approach

Authors: Odunayo Magret Olarewaju; Stephen Oseko Migiro; Mabutho Sibanda

Addresses: Department of Management Accounting, Durban University of Technology, Ritson Campus, Durban, South Africa ' Graduate School of Business and Leadership, University of KwaZulu-Natal, Westville Campus, Durban, South Africa ' School of Accounting, Economics and Finance, College of Law and Management Studies, University of KwaZulu-Natal, Westville Campus, Room 221, J Block, Dean's Office, Durban, South Africa

Abstract: Dividend payout policy of banks has been the commonest dividend policy in commercial banks world-wide owing to the assumption that it will minimise agency costs in the banks. Hence, this study adopts the dynamic panel two-step system and differenced GMM in analysing the data of 250 commercial banks from 30 countries in Sub-Saharan Africa (SSA) for the period 2006 to 2015 to examine the determinants of the dividend payout ratio of these banks. The empirical results reveal that past year dividend is the most significant determinant of current year dividend. Taxation and capital adequacy ratio, which are the legal and regulatory factors considered, are found to be insignificant. Our findings reveal earnings-after-tax and leverage as being significant determinants of payout ratio in SSA banks. Hence, Lintner's model holds in SSA banks as a region and it is, therefore, recommended that it must be strictly followed in setting the dividend process of commercial banks in SSA.

Keywords: system-GMM; differenced-GMM; Lintner model; payout policy; agency cost; capital adequacy.

DOI: 10.1504/AAJFA.2019.096912

Afro-Asian Journal of Finance and Accounting, 2019 Vol.9 No.1, pp.40 - 59

Received: 20 May 2017
Accepted: 03 Dec 2017
Published online: 13 Dec 2018 *

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