Determining dividend payouts of the MENA banking industry: a probit approach


  • Rola Elkabbani
  • Christian Richter German University in Cairo
  • Mona ElBannan



The purpose of this cross-country study is to highlight the main determinants of the payout policy in the banking sector on a sample of MENA countries during the period of 2011-2016. Dividends act as a signaling tool to convey the bank’s overall stability and positive growth prospects. Large and profitable banks are more prone to distribute dividends. However, managers seek profitability and dividends distribution at the expense of high liquidity risk. Competition is the most influential determinant of dividend payout in the MENA region, in which dividends act as a control mechanism to reduce the agency costs between shareholders and managers.

Author Biography

Christian Richter, German University in Cairo

Prof of Economics, Head of Dept


Abreu, J. F., & Gulamhussen, M. A. (2013). Dividend payouts: Evidence from US bank holding companies in the context of the financial crisis. Journal of corporate Finance, 22, 54-65.

Al-Taleb, G. (2012). Measurement of impact agency costs level of firms on dividend and leverage policy: An empirical study. Interdisciplinary Journal of Contemporary Research in Business, Institute of Interdisciplinary Business Research.

Amidu, M., & Abor, J. (2006). Determinants of dividend payout ratios in Ghana. The journal of risk finance, 7(2), 136-145.

Angkinand, A., & Wihlborg, C. (2010). Deposit insurance coverage, ownership, and banks' risk-taking in emerging markets. Journal of International Money and Finance, 29(2), 252-274.

Ben Naceur, S., Goaied, M., & Belanes, A. (2006). On the determinants and dynamics of dividend policy. International review of Finance, 6(1‐2), 1-23.

Brunnermeier, M. K. (2009). Financial crisis: mechanism, prevention and management. Macroeconomic stability and financial regulation: key issue for the G, 20, 91-104.

Bulan, L., Subramanian, N., & Tanlu, L. (2007). On the timing of dividend initiations. Financial Management, 31-65.

Casey, K. M., & Dickens, R. N. (2000). The effects of tax and regulatory changes on commercial bank dividend policy. The Quarterly Review of Economics and Finance, 40(2), 279-293.

Cornett, M. M., Guo, L., Khaksari, S., & Tehranian, H. (2010). The impact of state ownership on performance differences in privately-owned versus state-owned banks: An international comparison. Journal of Financial Intermediation, 19(1), 74-94.

DeAngelo, H., DeAngelo, L., & Skinner, D. J. (2004). Are dividends disappearing? Dividend concentration and the consolidation of earnings. Journal of financial economics, 72(3), 425-456.

Eriotis, N. (2005). The effect of distributed earnings and size of the firm to its dividend policy: some Greek data. International Business & Economics Journal, 4(1), 67-74.

Fama, E. F., & French, K. R. (2001). Disappearing dividends: changing firm characteristics or lower propensity to pay?. Journal of Financial economics, 60(1), 3-43.

Glen, J. D., Karmokolias, Y., Miller, R. R., & Shah, S. (1995). Dividend policy and behavior in emerging markets: To pay or not to pay. The World Bank.

Han, K. C., Lee, S. H., & Suk, D. Y. (1999). Institutional shareholders and dividends. Journal of financial and Strategic Decisions, 12(1), 53-62.

Haq, M., & Heaney, R. (2012). Factors determining European bank risk. Journal of International Financial Markets, Institutions and Money, 22(4), 696-718.

Hoberg, G., & Prabhala, N. R. (2009). Dividend policy, risk, and catering. Review of Financial Studies, 22(1), 79-116.

Iannotta, G., Nocera, G., & Sironi, A. (2013). The impact of government ownership on bank risk. Journal of Financial Intermediation, 22(2), 152-176.

Jensen, G. R., Solberg, D. P., & Zorn, T. S. (1992). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of Financial and Quantitative analysis, 27(2), 247-263.

Kouki, M., & Guizani, M. (2009). Ownership structure and dividend policy evidence from the Tunisian stock market. European Journal of Scientific Research, 25(1), 42-53.

La Porta, R., Lopez‐de‐Silanes, F., & Shleifer, A. (2002). Government ownership of banks. The Journal of Finance, 57(1), 265-301.

Liu, S., & Hu, Y. (2005). Empirical analysis of cash dividend payment in Chinese listed companies. Nature and Science, 1(3), 65-70.

Modigliani, F. & Miller, M. H. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411-433.

Patra, T., Poshakwale, S., & Ow-Yong, K. (2012). Determinants of corporate dividend policy in Greece. Applied Financial Economics, 22(13), 1079-1087.

Raei, R., Moradi, M., & Eskandar, H. (2012). Do dividend policies signal Corporate Operating Characteristics?. Journal of Applied Finance and Banking, 2(4), 13.

Rafique, M. (2012). Factors affecting dividend payout: Evidence from listed non-financial firms of Karachi stock exchange. Business Management Dynamics, 1(11), 76.

Rozeff, M. S. (1982). Growth, beta and agency costs as determinants of dividend payout ratios. Journal of financial Research, 5(3), 249-259.

Setia‐Atmaja, L., Tanewski, G. A., & Skully, M. (2009). The role of dividends, debt and board structure in the governance of family controlled firms. Journal of Business Finance & Accounting, 36(7‐8), 863-898.

Solanko, Laura, and Zuzana Fungáčová (2008). "Risk-taking by Russian banks: do location, ownership and size matter?."

Thanatawee, Y. (2011). Life-cycle theory and free cash flow hypothesis: Evidence from dividend policy in Thailand. International Journal of Financial Research, 2(2).

Theis, J., & Dutta, A. S. (2009). Explanatory factors of bank dividend policy: revisited. Managerial Finance, 35(6), 501-508.

Utami, S. R., & Inanga, E. L. (2011). Agency costs of free cash flow, dividend policy, and leverage of firms in Indonesia. European Journal of Economics, Finance and Administrative Sciences, 33(6), 7-24.

Wei, Z., Wu, S., Li, C., & Chen, W. (2011). Family control, institutional environment and cash dividend policy: Evidence from China. China Journal of Accounting Research, 4(1-2), 29-46.




How to Cite

Elkabbani, R., Richter, C., & ElBannan, M. (2020). Determining dividend payouts of the MENA banking industry: a probit approach. Economics and Business Letters, 9(3), 221–229.