Board dynamics, dividend pay-out policy and banking efficiency in an emerging market context

Abstract

In this paper, we examine the interactive role of board dynamics in explaining the link between dividend pay-out policy and banking efficiency. Prior to that, it investigates whether board dynamics contribute to dividend pay-out policy. The study applies data from 23 Ghanaian banks over the period 2010-2020. The panel-truncated regression was used to examine the interaction effect of board dynamics and dividend pay-out on banking efficiency. We found that the banks in Ghana do not fully utilise their inputs to be able to operate on their optimal efficiency. We found that board independence, board size and tenure of CEO are important determinants of dividend pay-out policy. Further, free cash flow' hypothesis explains a negative impact of board dynamics and dividend pay-out policy on banking efficiency. The current study makes novel contribution to the existing literature by establishing that board dynamics play a strong interactive role in the relationship between persistent dividend pay-out policies and banking efficiency.