Dividend policy and firms’ performance: a case of listed banks in Ghana

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AUGUST, 2015
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The study examines whether dividend policy influences banks performance in Ghana. The choice for the study stems from the pivotal role banks play in the financial development of the economy and hence if not given the critical look could lead to spiralling adverse effects on the other sectors of the economy in which case studies in this area have not received much attention in Ghana. The analysis have been performed using data derived from the financial statements of listed banks on the GSE, BoG and GSS during the most recent ten year period on which data were easily accessible. Stata version 13 was used to estimate the regression results. The results show positive relationships between return on equity and dividend policy. The results further reveal that bank size, CEO duality banks age of listing since IPO, capital adequacy and growth in sales revenue are significant determinants of banks performance in Ghana. Surprisingly, inflation and leverage proved insignificant in determining banks performance for the present study. As way of robustness check, the Tobin‘s q calculated as the ratio of market value of equity to their book values, could not also fail to provide consistent results for the study. The study thus supports previous studies. It is recommended that banks devote critical attention to the creation of an ideal and sustainable dividend policy specifically, adopting steadily increasing dividend policies whilst curtailing agency problems and other suboptimal decisions to shareholders in order to ensure enhancement in banking performance.
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Accounting Option)