Abstract
The purpose of this study is to investigate the association between bank growth and the retained earnings amount for Jordanian banks between 2010 and 2020. The method to be used is regression models. Bank growth is measured using the change in total assets; income retention is measured by subtracting dividends from earnings per share and by deducting dividend per share from the operating cash flow on the accrual basis and cash basis. In addition, another specification will be used to the association between the growth of a bank’s total assets and income retention using the percentage change in the growth of a bank’s total assets and income retention on the accrual and cash basis. The findings of pooled OLS regression models and random effect models show that there is no relationship between income retention using the accrual basis and the bank total assets growth (Adj-R2 was –005). There is a significant relationship between income retention using the cash basis and the bank growth in total assets (Adj-R2 was 14%). There is no significant association between change in income retention using the cash basis and the bank growth in total assets, and bank size affects the relationship between income retention and bank growth in total assets. Users of financial statements need to be aware of the association between the several variables used in this study to make sound decisions.
Highlights
Bank growth is measured using the change in total assets; income retention is measured by subtracting dividends from earnings per share and by deducting dividend per share from the operating cash flow on the accrual basis and cash basis
There is no significant association between change in income retention using the cash basis and the bank growth in total assets, and bank size affects the relationship between income retention and bank growth in total assets
The study findings showed that high Jordanian banks’ dividend policy on bank growth dividend payout firms tend to experience strong ex- to show if the firms benefit from their retained pected earnings growth in the future
Summary
Retained earnings are the amount that a company retains after distributing dividends. A company finds itself with two sources that it obtains, to pay dividends (part of the net income to owners) or retain a part of the net income to reinvest for growth and expansion. Dividend policy should be determined by balancing the rate of growth and the level of distribution. Because the firm appoints managers, ideally they prioritize and act in the interests of the firm They will want to use the firm’s profits to be reinvested in investments that generate more profits and forget the investors’ interests, and this will influence the percentage of dividend payments to be lower than they should (Al Sharawi, 2021).
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