BANK DIVIDEND POLICY: EXPLANATORY FACTORS

Abstract

This study identifies factors that explain bank dividend policy by adapting the Barclay, Smith, and Watts (1995) model. Our model uses investment opportunities, capital adequacy, size, signaling, ownership, dividend history, and risk to explain dividend payments. Empirical analysis suggests a negative relationship between dividend payments and investment opportunities, signaling, ownership, and risk and a positive relationship to size and dividend history. Our results lead to five guidelines for making dividend payout decisions.