Determinants of Dividend Payout Policy of Listed Corporations in Nigeria

Abstract

This study examines the underlying components that determine the dividend policy statement of corporations in Nigeria. The study purposively select ninety-four (94) corporations out of the universe of companies listed in the Nigerian Stock Exchange. Financial ratios were extracted and computed from published annual audited financial reports spanning 2007 to 2017. This was informed by the ex-post facto research design adopted to observe key indicators of these corporations in retrospect. The panel regression analysis was used to explain the numerical phenomenon collated. The Durbin-Wu-Hausman specification test found the fixed effect model to be more suitable. The empirical results indicate that financial leverage has a significant negative impact on dividend payout; liquidity has an insignificant positive impact on dividend payout policy; profitability has an insignificant positive impact on dividend payout decision; and company size has a significant positive impact on dividend payout dicision. The study concluses that liquidity, profitability and company size are the determinants of the dividend policy of corporations in Nigeria. More specifically, company size was found to be a major determinant to the dividend policy statement of corporations in Nigeria. The study suggests that, corporations should sustain their liquid positions, asset base and profit levels at all times to meet the universe of desires of their shareholders.

The Determinants of Dividend Policy: An Empirical Study of Inconsistent Distribution of Dividends Using Balanced Panel Data Analysis

“…The result of this study is the same with the explanation of Badu (2019); Hartono & Matusin (2020); Rizqia et al (2013); Sari (2017); Sharma & Bakshi (2019);and Wahjudi (2020). This shows that the company pay dividends to shareholders, not because of the level of profit earned but due to some considerations given by the management (Badu, 2019;Wahjudi, 2020). This considerations such as investment opportunities help to suppress dividends and increase profit earned (Rizqia et al, 2013).…”

“…The study of Badu (2019); Bostanci et al (2018); Patra et al (2012); and Sharma & Bakshi (2019) showed that liquidity positively affect dividend policy. According to Wahjudi (2020) showed that liquidity negatively affects dividend policy.…”

“…This brings about an increase in size and also, high growth tends to increase the internal and external funds thereby making the dividend rate to reduce. The pecking order theory specifies that firm grow positively so as to increase the retained earnings and reduce the dividend rate (Alzomaia & Al-Khadhiri, 2013;Badu, 2019;Sharma & Bakshi, 2019).…”

“…Financial institutions assess the firm age as one of the indicators of acting as a creditor. Therefore, the firm is able to suppress dividends because it has a good investment opportunity (Badu, 2019;Labhane & Mahakud, 2016;Ranajee et al, 2018).…”

“…The choice of stocks is an instrument for investors during an investment because of the benefits of high attractiveness. Their funds help in increasing welfare with the expectation of profits that include capital gains and dividend yields (Badu, 2019;Damodaran, 2015).…”