The impact of dividend policy on the performance of rural banks in Ghana

Abstract

The most debated issue or controversy in the field of finance is over the impact of dividend policy on the performance of a company (Brealey and Myers 2002). Different views exist regarding the impact of dividend policy on the performance of firms. Some empiricists argue for dividends irrelevance while others take the opposite view and maintain that dividends do have relevance. This current study has been undertaken aiming at evaluating the impact of dividend policy on performance in the context of selected rural banks in Ghana. Seven rural banks were selected in Ghana. The study has covered secondary data and primary data. Quantitative tools such as percentages, averages, tables and chats were used in the analysis of the findings. At the end, it revealed that there is a positive correlation between dividend policy and rural banks performance. Also, the rural banks with a higher dividend payout have their performance or share value higher. Besides, the study recommends that dividend paying firms should continue to maintain a steady growth in dividends unless there is a very good reason to make profit and expand. Also, because there are different shareholders preferences, firms should find out from their shareholders what suit their preferences before dividends policy decisions are made.