The effect of dividend policy on the financial stability of Iranian banks

Subject Areas : Financial Econometrics and Quantitative Methods

Seyyed Yahya Asadollahi ¹ , Somayeh Matin ² , Marzieh Yosofinejad ³

1 - Department of Accounting, Malayer Branch, Islamic Azad University, Malayer, Iran.
2 - Department of Accounting, Malayer Branch, Islamic Azad University, Malayer, Iran.
3 - Department of Accounting, Shiraz University, Shiraz, Iran.

Received: 2023-03-25 Accepted : 2023-06-08 Published : 2023-06-22

Keywords: Financial stability, dividends paid, Retained Earnings,

Abstract :

Purpose: The present study examines the effect of dividend policy on the financial stability of banks. For this purpose, the relationship between the dividend policy and the stability of the dividend policy with the financial stability of banks in the long and short term was tested. Methodology: In this research, 23 banks admitted to the Tehran stock exchange and over-the-counter stock exchange in the period between 2011 and 2019 were examined. The data of the research was collected with the approach of mixed data and using the estimation method of the vector autoregression model by the method of co-accumulation of Johansson-Josilius and the vector error correction model and it was statistically analyzed with the help of Eviews software.Findings: The results of the research show that the ratio of dividends paid has a positive and significant effect on the financial stability of banks in the long term, and the ratio of accumulated profits also has a negative and significant effect on the financial stability of banks in the long term, and the findings showed that stability in the distribution policy Dividends have a positive and significant effect on the financial stability of banks in the long term.Originality/scientific added value: The importance of the financial stability of banks in the monetary system has made it necessary to study the effect of profit sharing policies on the financial stability of banks. Dividends can have a great impact on the cost of capital, financial risks and the future price of banks' stocks.

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