The Effect of Corporate Governance on Bank's Dividend Policy: Evidence from Jordan
►Demeh Ahmad Daradkah and Moh'd Mahmoud Ajlouni
10.52283/NSWRCA.AJBMR.20130301A04
ABSTRACT
This study aims at investigating the relationship between corporate governance measures and dividends policy, along with other control variables, such as tax charges, growth rate, market valuation of the bank’s book value and profitability. Using all banks listed in Amman Stock Exchange during the period 2001-2009, the analysis is performed by employing each of the institutional ownership and top shareholders, separately, as a proxy of corporate governance (GC) and dividends payout ratio (DPR) as a proxy for the dividends. The empirical results show strong evidence on the importance of one simple CG measure, i.e. institutional ownership concentration or top shareholders, on bank’s DPR. Similarly, there were evidences on the effect of tax charges, total assets growth rate, market valuation (MVBV) and profitability (ROE) on dividends policy. Thus, banks with more institutional investors or top shareholders have higher DPR, which is consistent with agency models of dividends. In addition, taxes, market valuation and profitability are negatively associated with DPR, which is consistent with stock valuation models.
Keywords: Corporate Governance, Dividend Policy, Banks, Jordan.