Determinants of Dividend Payout in Private Insurance Companies of Ethiopia

Abstract

This study aimed to identify determinants of dividend payout in Ethiopian private insurance companies. To achieve this objective, a quantitative research approach was used. Secondary data from ten insurance companies for eleven years period from 2010 to 2020 were used as panel data for analysis. The study analyzed both internal and macroeconomic variables; profitability, liquidity, leverage, firm size, firm age, and growth from internal factors and GDP and inflation from Macroeconomic variables. The random effect model was used to identify the effect of each explanatory variable on the dividend payout of Ethiopian private insurance companies. The result showed that profitability, liquidity, and firm size were found significant factors in dividend payout. Contrary to the predictions, the remaining variables-firm age, leverage, growth, GDP, and Inflation found to be insignificant. Thus, profitability, liquidity, and firm size have a positive and significant effect on dividend payout as predicted. Therefore, Ethiopian private insurance company managers should prioritize profitability, liquidity, and firm size when making dividend payout decisions.