Preceding Dividend as a signal of Future Dividends: Evidence from Chinese Commercial Banks

Dividend policy is a prime concern ofall stakeholdersfor itrepresentsmajor cash outflow.Understanding the causes that affect dividend policy is of a prime concern for investors and academia. Firm specific and market specific factors are chosen from extant literature for empirical analysis. Secondary data is used for statistical analysis the empirical results indicatesignificant relationship ofprovisioning against non-performing loans (LNPNPL), total assets (LNTA) and return on assets (ROA) ondividend payout ratio. LNPNPL significantly and negatively causes dividend policy, this indicates that banks with higher level of risk pay less dividends. Similarly, ROA significantly and positively explains variations in dividend payout ratio. The positive relationship tells that banks with higher returns (profitable banks) pay higher dividends. The negative and significant relation (causal) between LNTA and dividend payout indicates that Chines banks pay less dividends as they grow bigger in size.Other variables of model indicate insignificant relationships.Findings support existing literature but the size of bank has significant but inverse relationship with dividend policy.The findings open space for further worksince size of the bank shows negative relationship with dividend payout ratio.