Does Ownership Concentration Affect Profitability and Dividend Policy?
Evidence from Listed Banks in Jordan
Author(s): Ahmad Dahiyat, Esra Al-Nsour
Abstract: This paper examines how the ownership concentration affects banks’ profitability and dividend policy in Jordan. All banks listed on the Amman Exchange were selected (16 banks) over the period 2010 to 2019. Ownership concentration was defined as the percentage of ownership that equals or exceeds 5%, while profitability was defined by return on equity; dividend policy was defined by the pay-out ratio. Simple regression was utilized to examine the effect; the result revealed that ownership concentration has a positive significant impact on profitability, which means that banks with higher ownership concentration have better profitability, this result justified by the view of the power that controlling shareholders can greatly use to require management to make decisions that improve the performance. The finding showed a negative significant impact on dividend policy, which indicates that the existence of large shareholders can reduce agency conflicts; and maximize the wealth of the company. It is recommended that related parties especially investors should take the concentration of ownership as an important factor to take their investment decisions, whether related to purchasing banks’ shares for various purposes, or expectations of potential dividends.
Keywords: Ownership structure, Return on equity, Dividend pay-out, Banks, Ownership concentration
DOI: 10.37394/23207.2021.18.96WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 18, 2021, Art. #96