Al-Azhar University – Gaza Deanship of Postgraduate studies Faculty of Finance and Business Administration Depart of. Business Administration "Dividend Payout Policy and its Relationship in Profitability at Banking Institutions" A Comparative Study between Palestinian Commercial Banks and Jordanian Commercial Banks (2013-2017) "عﻻقة سياسة توزيع اﻻرباح بالربحية في المؤسسات المصرفية": دراسة مقارنة بين البنوك التجارية الفلسطينية والبنوك التجارية اﻻردنية )3102-3102( Submitted by: Mostafa Emad Mohammed Abu Tawelah Supervised by: Dr. Wael Mohammed Ibrahim Thabit A thesis submitted in partial fulfillment of the Requirements for the Degree of Master in Business Administration MARCH 2020 Declaration I declare that this entire thesis has been written by me and submitted for the Master's degree in Business Administration. Further, the results have not submitted for another degree at any other university or institution. Author: Mostafa E Abu Tawila Signature: Mostafa Emad All Rights Reserved © 2019. No part of this work copied, translated, or stored in a retrieval system, without prior permission of the author. II Dedication I dedicate this thesis to my wonderful Dad, who still supporting me and taught me to be strong and to keep going to attain my dreams. To my gorgeous Mom, who prays day and night to make me able to get success. To my graceful brothers: Mohammed, Abdul-Aziz, Moamen, Ahmed, Bilal, Mamdouh, and Rezeq, for all love and support. Thanks to all my friends. III Acknowledgments First of all, I would like to thank (Allah) for granting me the power and support to create this thesis. Next, I would like to extend my gratitude to various people, who had involved in the process of lettering this research, and for the feedback and help that has given, which have been outstanding. Also, I would like to thank my advisor Dr. Wael Mohammed Thabit, for thorough supervision and input, which has significantly helped me in formulating the thesis. Moreover, I would like to thank Dr. Jaber Ibrahim Aldaour and Dr. Wael Hamdi Addaia who deserves a big thanks, because they helped me in my research work. Lastly, I would like to thank all BA department members at Al-Azhar University– Gaza, for their support. IV Abstract This study aimed to test the relationship of dividend payout policy to profitability in the commercial banking institutions in Palestine and Jordan, as a comparison between a couple of countries. Accordingly, the study concerned a sample of nine Jordanian commercial banks, and one Palestinian commercial bank (Bank of Palestine), and that during the period 2013-2017. Besides, Data obtained through the financial reports of commercial banks, and the Securities Depository Center. Moreover, the independent variable (Dividend Payout Policy) measured by using the following dimensions (Dividend payout ratio DPR, Dividend per share DPS, Dividend yield DY) and the dependent variable (profitability) measured by using the subsequent dimensions (return on assets ROA, return on equity ROE), Additionally, to reach the results, the descriptive-analytical method was applied by performing the following tests (Panel data analysis and Multiple linear regression). The study results: First, the results declared that there are variations in the patterns of dividend policy, followed by the Jordanian commercial banks and the Bank of Palestine. Secondly, the results demonstrated a positive relationship between DPS, Return on Assets (ROA) and Return on Equity (ROE). Thirdly, there is a negative relationship between the dividend payout ratio (DPR) and dividend yield (DY) with return on assets (ROA) and return on equity (ROE). Additionally, there are differences in the impact of the results between the Bank of Palestine and each Jordanian bank individually, where these differences shown in tables (4.9) and (4.17). The study recommendations: Increasing planning for the development of the dividend policy and taking into account the factors and determinants that affect the dividend policy. Also, allocating time, effort, and necessary resources, and making use of available resources commensurate with the increase in assets and capital and distributing cash dividends in proportion to the amount of available liquidity, and more studies recommended in Jordan and Palestine, either using the same dimensions or using others such as (ROI, EPS), with the possibility of expanding the time series in the same target sector of this study. Keywords: Dividend payout policy, Dividend theories, Profitability, Commercial Banks. V الملخص هذفج اىذراطت إىً اخخبار اىؼﻻقت بيِ طياطت حىسيغ اﻻرباذ واىزبسيت في اىَؤطظاث اىَصزفيت اىخداريت في فيظطيِ واﻷردُ مَقارّت بيِ اىبيذيِ. اشخَيج اىذراطت ػيً ػيْت ٍِ 9 بْىك حداريت أردّيت وبْناً حدارياً فيظطيْياً )بْل فيظطيِ( خﻻه اىفخزة 3102-3107. حٌ اطخخزاج اىبياّاث ٍِ خﻻه اىخقاريز اىَاىيت ىيبْىك اىخداريت وٍزمش إيذاع اﻷوراق اىَاىيت. زيث حٌ قياص اىَخغيز اىَظخقو )طياطت دفغ اﻷرباذ( باطخخذاً اﻷبؼاد )ؼٍذه حىسيغ اﻻرباذ DPR، زصت اىظهٌ ٍِ اىخىسيؼاث ػ ،DPSائذ اىظهٌ DY( واىَخغيز اىخابغ )اىزبسيت( باطخخذاً اﻷبؼاد )اىؼائذ ػيً اﻷصىه ROA، اىؼائذ ػيً زقىق اىَينيت ROE( وحٌ اطخخذاً اىَْهح اىىصفي اىخسيييي ىيىصىه إىً اىْخائح هذٓ اىذراطت باطخخذاً اﻻخخباراث )اﻻّسذار اىَخؼذد واهPanel data (. نتائج الدراسة: حشيز اىْخائح ىىخىد اخخﻻفاث في أَّاط طياطت حىسيغ اﻷرباذ اىخي حخبؼها اىبْىك اىخداريت اﻷردّيت وبْل فيظطيِ .ايضا، حظهز اىْخائح وخىد ػﻻقت إيدابيت بيِ حىسيؼاث اﻷرباذ ىيظهٌ اىىازذ )DPS( وؼٍذه اىؼائذ ػيً اﻷصىه )ROA( واىؼائذ ػيً زقىق اىَينيت )ROE(، مَا أظهزث اىْخائح وخىد ػﻻقت طيبيت بيِ ؼٍذه حىسيغ اﻷرباذ )DPR( وػائذ اىظهٌ )DY( ٍغ اىؼائذ ػيً اﻷصىه )ROA( واىؼائذ ػيً زقىق اىَينيت )ROE( باﻹضافت اىً وخىد فزق في زدٌ حأثيز اىْخائح بيِ بْل فيظطيِ ومو بْل أردّي ٍْفزدا، زيث حٌ حىضير هذٓ اىفزوق في اىدذاوه )9.9( و )9.07(. توصيات الدراسة: حىصي اىذراطت بشيادة اىخخطيظ ىخطىيز طياطت حىسيغ اﻷرباذ ٍغ ٍزاػاة اىؼىاٍو واىَسذداث اىخي حؤثز ػيً طياطت حىسيغ اﻷرباذ وحخصيص اىىقج واىدهذ واىَىارد اىﻻسٍت، واطخغﻻه اىَىارد اىَخازت بَا يخْاطب ٍغ اىشيادة في اﻷصىه ورأص اىَاه، وحىسيغ اﻷرباذ اىْقذيت بَا يخْاطب ٍغ ٍقذار اىظيىىت اىَخازت، و يَنِ إخزاء ٍشيذ ٍِ اىذراطاث في اﻷردُ وفيظطيِ، طىاء باطخخذاً ّفض اﻷبؼاد أو باطخخذاً أبؼاد أخزي ٍثو ) ROI، EPS(، ٍغ إٍناّيت حىطيغ اىظيظيت اىشٍْيت في ّفض اىقطاع اىَظخهذفت ٍِ هذٓ اىذراطت. الكلمات المفتاحية: طياطت حىسيغ اﻷرباذ، ّظزياث اﻷرباذ، اىزبسيت، اىبْىك اىخداريت. VI List of Abbreviations 1. DPP Dividend payout policy 2. ROA Return on Assets 3. ROE Return on Equity 4. DPR Dividend Payout Ratio 5. DPS Dividend Per Share 6. DY Dividend Yield 7. FI Financial Institutions 8. PSE Palestine’s Securities Exchange 9. ASE Amman’s Securities Exchange 10. GDP Gross Domestic Product VII Table of Contents: CHAPTER ONE ............................................................................................................................................................. 1 THE GENERAL FRAMEWORK OF THE STUDY .................................................................................................................... 1 1.1 Introduction ......................................................................................................................................................... 2 1.2. Study problem .................................................................................................................................................... 3 1.3 Justifications for choosing the subject of the study ............................................................................................. 4 1.4 The importance of the study ............................................................................................................................... 4 1.5 Objectives of the study ........................................................................................................................................ 4 1.6 Study model ......................................................................................................................................................... 5 1.7 Hypotheses of the study ...................................................................................................................................... 5 1.8 The study methodology ....................................................................................................................................... 6 1.9 Study Limits ......................................................................................................................................................... 6 1.10 The study terms ................................................................................................................................................. 6 1.11 Conclusion ......................................................................................................................................................... 7 CHAPTER TWO ............................................................................................................................................................ 8 THEORETICAL FRAMEWORK........................................................................................................................................... 8 2.1 INTRODUCTION ............................................................................................................................................................. 9 2.2 DIVIDEND POLICIES, AND THEORIES ....................................................................................................................... 10 2.2.2 Dividends policy concept ...............................................................................................................................