Effects of interest rate on banks dividend in Ghana

Abstract

The paper tries to figure out what effect the interest rate has on GCB Bank Plc's dividend. For the study, time series data from 2000 to 2020 are put through the Autoregressive Distributed Lag (ARDL) model. ADF and PP was tests to see if the dividend, interest rate, profitability, and inflation rate data set was stationary. The outcome was that the variables were stationary at levels and first differences. In the long run, ARDL tests show that the relationship between a bank's dividend and its interest rate and profitability is negative. In the short run, there is also a relationship between interest rate and dividend that is not positive. However, there is a positive relationship between the bank’s profitability and dividend. Finally, an impulse (shock) on interest rate in the short run period had a negative relationship with dividend but the long run period shows a positive relationship among the two variables.

Keywords: interest rate, dividend, GCB Bank PLC

DOI: 10.7176/RJFA/13-20-07

Publication date:October 31^st 2022