The Effect of Dividend Policy on the Market Value of the Jordanian Commercial and Islamic Banks Listed on the Amman Stock Exchange

This study aims at examining the effect of Dividend Policy on the market value of Jordanian commercial and Islamic banks. The study population consists of all Jordanian banks listed on the Amman Stock Exchange during the period from 2008 – 2018. Data were collected from the annual reports of the sample banks. After the data collection, they were analyzed using descriptive analysis, correlation analysis, and multiple regression analysis. The results showed a statistically significant impact of dividend policy, this result indicates that there is an impact of the dividend policy on the market value of Jordanian commercial and Islamic banks listed on the ASE during the period 2008-2018. The results also showed a difference between the companies in terms of dividend policy followed, in addition, asymmetry in the Dividend Policy in banks during the study period. The study recommended a number of recommendations, including that manager of firms, should develop effective dividend payout policies to ensure that their firms pay out dividends to enhance the value of their companies and plan an efficient and reliable dividend policy, to suit the wishes of investors, and to engage stakeholders in a dialogue on dividend policy.


Introduction
The maximization of shareholder wealth is one of the most important objectives of companies by maximizing their value. Consequently, there are many decisions that can affect the company's value, such as financing decisions that determine whether they should rely on external financing such as debt, By using retained earnings instead of borrowing, and thus the trade-off between the distribution of profits or the holding of owners in order to reinvest them for expansion and growth (Said Omar & Echchabi, 2019).
Dividends not only provide tangible and tangible evidence of the company's profitability and ability to finance itself but also provide real evidence of the company's ability to get cash from its operational activities. Adesola and Okwon (2009). That the company will resort to another source of cash such as issuing new shares or borrowing to finance new projects. (Sindhu, 2014).
The examination of the relationship between the dividend policy and the concentration of ownership with the performance of Jordanian financial companies is itself important for the current study because there are differences between the environment in which most of the previous studies and the working environment of Jordanian financial companies in terms of market efficiency and the size of information available to researchers, , And the size of the financial and accounting disclosure in the annual reports. This study will also attempt to cover the last ten years to test the relationship between the dividend policy and the performance of Jordanian financial companies.
The capital market in Jordan is a developing market characterized by limited competition, low liquidity and high rate of return and risk compared to the markets of developed countries. Most investors who lose money on stock exchanges are usually small investors because they may not be stock market professionals. Or because they lack the ability to determine the factors influencing stock prices, especially with respect to financial structure and cash dividends, and may not have the ability to identify which stocks to buy or sell, so knowing the impact of dividend policy and financial structure on the stock market price can help investors to understand the nature of these stocks and the possibility of avoiding the loss of equity. Hence the problem of this study in identifying the impact of dividend policy on the market value of Jordanian commercial and Islamic banks.

Theoretical Background
The Bank's financial decisions are classified into two main categories: investment decisions and financing decisions (Baker & Powell, 1999). Investment decisions pertain to the type and quantity of assets that you wish to maintain. Financing decisions involve securing funds to finance these assets, (Banerjee et al., 2007). Dividend policy decisions can be considered as financing decisions as they affect the amount of dividends distributed to shareholders and the amount of retained earnings for reinvestment (Biza-Khupe & Themba, 2016).
Dividend policy is one of the most challenging issues in the modern financial economy. The best distribution policy requires balancing current distributions and future profits so that they reflect positively on share price, meet owners' needs or send a market signal about a particular situation. (Chumari, 2014). Emeni and Ogbulu (2015) considers dividend policy to be the basis and principles for dividing profits into a portion that is distributed to shareholders and a portion that is held for reinvestment. Determining the amount of profits to be paid will affect the wealth of shareholders and the ability of the bank to retain profits to invest in available investment opportunities. Therefore, dividend and financing decisions are interrelated and cannot be separated (Banerjee, et al., 2007). For example, if the bank decides to distribute dividends to shareholders, it means that the profits available to invest in profitable projects are low, leading to a trend towards external financing, so it is not surprising to see some managers looking at cash dividends as a factor that would effect On shareholder wealth and bank value (Baker & Powell, 1999).
According to the Bird-In-Hand Theory, cash dividends are relevant and affect the market value of a share. Investors value dividends more than capital gains when making investment decisions. Current cash dividends are relatively assured compared to future capital gains, therefore, a bird in the hand (dividend) is, better than a group of birds on the tree (capital gains). According to this theory, investors prefer to get a certain amount of income now instead of waiting for a higher amount of uncertain income in the future (Al-Malkawi, 2007), and the risk premium resulting from uncertainty leads to an increase in the required return, Share price (Abdella, et al., 2016). According to the signaling theory of reference, dividend policy can refer to hidden information about the bank based on its managers' procedures towards maximizing wealth for shareholders. The theory suggests that any changes in cash dividends will prompt investors to think about the future value of the bank (Ali, 2010).
The agency's theory plays an important role in financing decisions because of problems between debtors and shareholders (Deepte & Roshan 2009). The agency's theory suggests that managers prefer to have a high level of cash flow even if there is no profitable investment opportunity they can use the funds to achieve their own benefits more than strengthening or increasing the value of banks (Abdella, et al., 2016). The Agency's theory assumes that capital structure decisions should aim at reducing Agency-related costs by reducing financing from owners in the capital structure (Afza & Mirza, 2010). This is done through increased debt financing and thereby increasing the Bank's market value as well as reducing conflicts which may exist between bank managers and shareholders (Wang, 2010).

Empirical Literature
Many studies have sought to determine the impact of dividend policy on companies and their financial performance and on the reactions of the market. The study of Friend and Puckett (1964) was one of the first studies to examine the impact of dividend policy on stock prices, where it was found that the dividends affect positively on the share price. In contrast, Baskin (1989) found an inverse relationship between dividend policy and stock price volatility in the United States. With regard to recent studies, Murekefu and Ouma (2013) showed that dividend policy is an important and influential factor in the company's performance, Uwuigbe et al. (2012) also discovered that there is a positive relationship between the performance of the company and dividend policy, which improves the value of market shares and thus affect the market values of companies. Ajanthan (2013) also showed that there is a positive relationship between the dividend policy and profitability of the company in Sri Lanka. Luvembe et al. (2014) found that there is an impact for dividend policy on the market value of commercial banks in Nairobi Stock Exchange, noting that investor decisions in financial markets are heavily dependent on both the financial structure and the dividend policy pursued by banks.
Chenchehene and Mensah (2015) also discussed the impact of the dividend policy on shareholders wealth in the UK. The shareholder's wealth was measured using the market value to book value of the share price. The study found that dividend policy affects the shareholder's wealth by affecting the share price. SijolNur and Abdul Basit (2016) found that the dividend policy did not have a consistent pattern of influencing the financial performance of companies in the US, nor did the study find a clear relationship between the value of the market share and the dividend policy of companies listed in the sample. Adesina et al., (2017) showed that there is a significant positive correlation between dividend policy and the market price of bank shares in Nigeria.
Based on a review of previous literature, the following hypotheses can be formulated:

Ho: There is no statistically significant effect of dividend policy on the market value of Jordanian commercial and Islamic banks listed on the ASE.
This main hypothesis is divided into two sub-hypotheses: Ho.1: There is no statistically significant effect of dividend policy on the market value of Jordanian commercial banks listed on the ASE.
Ho.2: There is no statistically significant effect of dividend policy on the market value of Jordanian Islamic banks listed on the ASE.

Population and Sample of Study
The study population consists of all (15) Jordanian banks listed on the Amman Stock Exchange during the period from (2008 -2018). The study will be based on a comprehensive survey system. The sample will include the entire community.

Sources of Data Collection
The researcher relied on secondary data by reviewing the books and studies related to the subject of this study. For the purpose of the analysis, reference was made to the websites of the banks included in the study sample and the website of the Amman Stock Exchange (www.ase.jo) in order to obtain the financial statements of banks and collect the necessary data. Debt Ratio (DEBT): measured by total liabilities to total assets at the end of the year.

Model
The standard model below will be adopted to test the hypotheses of the study: SIZE it : the natural logarithm of total assets for bank (i) at the end of the year (t).
DEBT it : total liabilities bank (i) at the end of the year (t) / total assets bank (i) at the end of the year (t).

Descriptive Statistics of the Study Variables
The following table represents descriptive measures for model variable according to Islamic and commercial banks.

Estimate the Model
The study adopts the econometric analysis using panel data that combines time-series and cross-sectional data.
To investigate the effect in study models, the study depended on the model related for panel data:     The above table reports that R Square, the coefficient of determination equal to (0.258), which means that about (25.8%) of the variation in market value of Jordanian Islamic banks (MV) is explained by the model. The significance value of the F statistic (F=24.140) is (Prob F = 0.000) less than 0.05, which means that the effect of independent variables aggregated is significant.
Moreover, the coefficients of the regression states that (DIV) has a significant positive effect on MV, where coefficient value equals (9.351) is significant with (  give a signal about the ability of banks to continue to make profits and maximize shareholders' wealth. It also indicates the efficiency of the bank's management and its ability to maintain investor funds. Investors 'views on Islamic banks' shares are also no different from those of commercial banks.

Conclusion and Recommendations
This study aimed at identifying the impact of dividend policy on the market value of Jordanian commercial and Islamic banks. The study population consists of all Jordanian banks listed on the Amman Stock Exchange during the period from 2008 -2018. The study is based on a comprehensive survey system. The sample includes the entire community.
This result indicates that there is an impact of the dividend policy on the market value of Jordanian commercial and Islamic banks listed on the ASE during the period 2010-2017. Which indicates the earnings can be a sign of the bank's future earnings and thus affect the volume of demand for its shares and thus its market value. And there is an impact of the dividend policy on the market value of Jordanian commercial banks listed on the Amman Stock Exchange during the period 2008-2018. This result indicates that dividends provide an indication of the financial markets about the performance of banks and their management efficiency, and therefore the market values of banks. And there is an impact of the dividend policy on the market value of Jordanian Islamic banks listed on the ASE during the period 2010-2017. Which indicates that the Investors 'views on Islamic banks' shares are also no different from those of commercial banks.
Based on these findings, the study recommends the need to involve the management of banks to the shareholders in the dialogue on dividends, in order to clarify the role of cash dividends in improving the performance of banks and thus maximize their wealth in the future. As well as the need for the managers of banks listed on the stock exchange to develop a policy of cash dividends are effective and appropriate to the needs of investors, as this will affect the values of shares market and maximize the benefit of investors shares. As cash dividend distribution plays a significant role in influencing stock prices and market values.

Future Studies and Research
This study does not address many of the variables associated with cash dividends and financial structure. Therefore, this study recommends a series of future studies that may contribute to understanding the relationship between cash dividends, financial structure and market values of banks. The announcement of cash dividends and their impact on the reactions of the financial markets, as well as the impact of non-cash distributions, such as dividends.