An Empirical Analysis of the Relationship between Cash Flow and Dividend Changes in Nigeria

Adelegan, Olatundun Janet

doi:10.1111/1467-8268.00061

Cited by 42 publications

(61 citation statements)

References 28 publications

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“…Previous studies on the dividend decision of Nigerian companies have either employed aggregated regression analysis to examine the determinants of dividend policy or were conducted more than 30 years ago (Soyode, 1975;Oyejide, 1976;Ariyo, 1983;Adelegan, 2003). The Nigerian investment environment has witnessed significant changes since the return to democratic rule in 1999.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Corporate dividend policy in practice: the views of Nigerian financial managers

et al. 2015

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Purpose -The purpose of this study is to provide an additional insight into the dividend puzzle by investigating the field practice of dividend policy in an emerging market such as Nigeria. It also aims to contribute to the literature on industry-related dividend effect by examining whether managerial views on dividend policy differ between financial and non-financial firms.Design/methodology/approach -The study employs semi-structured interviews with the financial managers of 21 Nigerian listed firms. The interviewees were divided into two broad groups of financial versus non-financial firms based on the industry classification of the firms.Findings -The findings suggest that, despite differences in institutional environment, the dividend setting process in Nigerian companies is similar in many extents to those in the US and other developed markets. Nigerian companies exhibit dividend conservatism and typically focus on current earnings, stability of earnings and availability of cash when determining their current dividend levels. However, unlike in prior studies, the interviewees suggest that their companies do not have a target payout ratio; instead, they target the dividend per share when determining the disbursement level. Nevertheless, views regarding these issues vary significantly between financial and non-financial firms.Originality/value -This paper adds to the extant literature that has examined the behavioural aspects of dividend policy using interviews, especially in the context of less-developed markets such as Nigeria. The study also updates and extends prior evidence on an industry-related effect on managerial views on dividend policy.

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Section: Review Of Related Literaturementioning

confidence: 99%

Corporate dividend policy in practice: the views of Nigerian financial managers

et al. 2015

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“…Yeo (2018) examined the role of free cash flow in making investment and dividend decisions in shipping industries, employing generalized least square regression, and the result revealed that free cash flow leads to an increase in investment and reduction in dividends among a sample of 137 shipping firms from 35 countries. Although there is series of studies in Nigeria that examined the relationship between dividend policy and other variables like firm performance, share price, life-cycle theory, cash flow, and agency conflict among which are, Adelegan (2003), Tijjani & Sani (2016), Eniola & Akinselure (2016), Ogundipe et al (2012), Nwidobie (2013), Bingilar & Oyadonghan (2014), Inyiama & Nwankwo (2016), Okafor et al (2011). We could not find any study in Nigeria that directly tested the validity of the free cash flow hypothesis among firms trading in the Nigerian stock exchange.…”

Section: Empirical Reviewmentioning

confidence: 99%

Testing the validity of free cash flow hypothesis: Evidence from Nigeria

2020

IJFAM

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Purpose: This study empirically tests the validity of the free cash flow hypothesis among firms quoted on the Nigerian Stock Exchange (NSE) from 2007 to 2017. Research methodology: The study employed a dynamic panel system Generalized Method of Moments (GMM) in analyzing the data generated. Results: the result failed to provide empirical evidence in support of the Jensen free cash flow hypothesis in Nigeria. The equally showed that a high concentration of shareholding in the hand of a few individual increases the amount of dividend paid out to shareholders. The result is however robust using different methods. Limitations: We focused only on testing the validity of the free cash flow hypothesis proposed by Jensen (1986). Contribution: The study provided empirical evidence that invalidates the propositions of the free cash flow hypothesis among publicly quoted firms in Nigeria. The result is robust using different estimation techniques.

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“…It acts as a monitor, and maintains discipline in the firm. It is believed that the decision of the board is supreme (Fama and Jensen, ; Adelegan, ). The findings show that there is a positive and significant relationship between board size and dividend policy.…”

Section: Review Of Literaturementioning

confidence: 99%

Quality of Corporate Governance on Dividend Payouts: The Case of Nigeria

Odeleye¹

2018

African Development Review

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Corporate governance (CG) safeguards shareholders' portfolios and ensures optimal returns in terms of dividend payouts (DPs) on investment. The association between CG and DPs could be significant in relation to risk exposure, operational and financing activities across firms and sectors. The relationship between CG and DPs has been well documented, however; the role of industry classification on the relationship has not been given adequate consideration in the literature. This study, therefore, examines the moderating effects of sector classification of CG on DPs in Nigeria. Agency theory underpins the model which captures the effects of CG on DPs. Governance indicators and dividend per share of 97 non-financial listed companies in Nigeria from 1995-2012 are utilized. The system generalized method of moments estimation technique is employed in the analysis. The empirical findings indicate a positive association between CG and DP. Additionally, the analysis underlines the importance of the mode of operations (sector classification) in the relationship between CG practices and DPs in Nigeria. Based on the results of the study, it is suggested that more independent directors should be on the boards of corporate firms and the proportion of institutional shareholding also be increased to improve monitoring.

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An Empirical Analysis of the Relationship between Cash Flow and Dividend Changes in Nigeria

Cited by 42 publications

References 28 publications

Corporate dividend policy in practice: the views of Nigerian financial managers

Corporate dividend policy in practice: the views of Nigerian financial managers

Testing the validity of free cash flow hypothesis: Evidence from Nigeria

Quality of Corporate Governance on Dividend Payouts: The Case of Nigeria

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