Abstract:
Dividend decision policy is one of the most important financial policies to companies as it affects
shareholders, consumers, workers, regulators, governments, growth rate of the firm, its credit
standing, share prices and ultimately the overall value of the firm. The main objective of this
study was examines the factors that determine dividend policy of insurance companies in
Ethiopia. In this study dividend payout used as dependent variables where as the independent
variables include both micro and macro. In order to achieve this objective the study used
explanatory research design. Balanced panel data covering 10 years period (2008-2017) for ten
insurance companies of audited financial statement from NEB and annual reports from each
insurance company were collected. The data were analyzed by using descriptive statics,
correlation analysis and regression analysis. The classical linear regression model assumptions
were employed. The random effect regression model used to estimates the coefficients of
variables and the result of the study indicates that profitability, growth, age, inflation and
interest rate has a positive relationship with dividend payout where as leverage, liquidity,
previous year dividend, and exchange rate has a negative relationship with dividend payout. In
this study growth, age, size and previous year dividend are the most important or significant
factors affecting dividend payout in Ethiopian insurance companies during the study period.
Therefore, Ethiopian insurance companies Board of director and managers should give attention
to growth, age of firms, size of firms and previous year dividend when they set dividend policy
and at the same time investors need to consider these variables in their investment decisions
when they want to make an investment in Ethiopian insurance company.
