Performance Evaluation of Shajalal Islami Bank 2010

International Research Journal of Finance and Economics ISSN 1450-2887 Issue 77 (2011) © EuroJournals Publishing, Inc. 2011 http://www.internationalresearchjournaloffinanceandeconomics.com

Determinants of Dividend Decision: A Focus on Banking Sector in Bangladesh

Farzana Huda Lecturer, Department of Business Administration East West University, 43, Mohakhali C/A, Dhaka-1212 Bangladesh E-mail: farjana_huda@yahoo.com Tel: +8801717826468 Tazrina Farah Lecturer, Department of Business Administration Faculty of Business and Economics Daffodil International University 102, Shukrabad, Dhaka-1207 Bangladesh E-mail: tazrinaf@gmail.com Tel: +8801717230529 Abstract This paper explores the determinants of the dividend policy of firms in the banking industry of Bangladesh. Dividend decision of a bank basically depends on its size, profitability, liquidity and retained earnings. The present study is an attempt to find out the key dividend determinant variables and their impact over cash, stock and total payout ratio. Statistical techniques of simple and multiple regressions have been used to explore the relationships between variables. The investigation results show the predictor variables have a significant relationship with stock payout and an apparent relationship with cash payout. Amongst all the independent variables, Net Income turns out to be most influential indicator in elucidating dividend payouts.

Keywords: Cash Payout, Stock Payout, Dividend Policy JEL Classification: G 35

1. Introduction

Public companies used to allocate the earnings of a fiscal year among the investors in terms of dividend. The policy of dividend distribution determines the proportion of funds to be used for general invertors benefit and the portion to be retained for future investment by increasing the firm capital. Dividend also provides a glimpse of company’s performance for the stockholders as well as for the capital market as demand of the firm’s share is usually dependent on the...