This paper aims to test for causality between two dividend policies (dividend payout and
dividend reinvestment plans) and return on equity as a measure of financial performance. Dividend
policies issues have been continually debated around the world with mixed results, and yet to date, no
definite conclusions have been reached. The study used 250 commercial banks from 30 SSA countries
over the period between 2006 and 2015 to run long-run causality tests. The results from the block
exogeneity Wald test from the panel vector error correction model, and the pairwise Granger causality
test shows that there is a unidirectional causality between return on equity and dividend payout ratio.
This implies no causality between dividend payout ratio and banks’ return on equity over the study
period. Hence, we conclude that the widely adopted model for the payment of dividends in the SSA
banking market is a win-lose game, as there is no causality between dividend payment and bank
performance. As such, we recommend that other dividend policies that can minimize future financing
costs, increase bank assets, and improve the future growth prospects of the region be explored
