Impact of Free Cash Flows on Dividend Pay-Out in Jordanian Banks

Abstract

Dividend pay-out is a concern for both managers and shareholders. The managers may use dividend policy to signal their performance. Thus, this study examines the effect of free cash flow, liquidity, bank size, leverage, profitability and bank age on the dividend pay-out ratio. The multiple regression analysis (panel data) was used to examine the hypothesis. The study found that free cash flow, liquidity, leverage and profitability were influential factors affecting the dividend pay-out ratio in Jordanian banks from 2004 to 2015. However, the bank size and bank age were found to be insignificantly related to the dividend pay-out in Jordanian banks. Similar to previous studies, this study suffered from different limitations. The main limitation was the data collection. The data was collected from Data Stream. However, only ten banks were found in the Data Stream reducing the sample to 120 observations/years. This study suggests that future studies to take into consideration the effect of the ownership structure on the dividend pay-out policy.