Effect of Dividend Policy on Stock Price of Some Selected Nigeria Listed Firms
Abstract
This study examined the effect of dividend policy on share price of selected companies listed on the Nigerian stock Exchange. In the academic literature there have been fewer studies in this regard, especially in developing economies like Nigeria. The study adopted ex-post facto research design with panel data covering the study period. A sample of 49 companies out of 162 companies listed on the Nigerian stock Exchange during the study period (2013-2022) was randomly selected for the panel data. The study found that the dividend payout ratio and dividend yield have significantly positive effect on the share price of firms while dividend per share has insignificantly negative effect on the share price of firms. Financial leverage has significantly negative effect on the share price of firms. The study concluded that dividend policy have significant effect on share price. The study recommended that companies should focus more on the payout while investors should go for corporate entities with constant payout ratio.
Keywords
firm size
financial performance
deposit money
stock exchange
influence
References
Adenugba, A. A., Ige, A. A., & Kesinro, O. R. (2016). Financial leverage and firms’ value: A study of selected firms in Nigeria. European Journal of Research and Reflection in Management Sciences, 4(1), 14-32. Adesola, W., & Okwong, A. (2009). An empirical study of dividend policy of quoted companies in Nigeria. Global Journal of Social Sciences, 8(1), 85-101.Available at: https://doi.org/10.4314/gjss.v8i1.48907. Agila, M., & Jerinabi, U. (2018). Dividend policy and its impact on shareholder’s wealth and firm performance: A study of listed cement companies. IOSR Journal of Business and Management, 20(9), 28-31. Ajayi, M. A., & Nageri, K. I. (2016). Measuring leverage effect on the Nigerian stock exchange in the post financial meltdown. Amity Journal of Finance, 1(2), 1-21. Akintoye, I. R. (2006). Investment decision concept analysis and management. Lagos: Unique Educational Publishers. Alajekwu, U. B., & Ezeabasili, V. N. (2020). Dividend policy and stock market price volatility in the Nigerian stock market. British Journal of Management and Marketing Studies, 3(4), 37-52. Araoye, F. E., Aruwaji, A. M., & Ajya, E. O. (2019). Effect of dividend policy on stock price volatility in Nigeria Stock Exchange. International Journal of Accounting and Financial Reporting, 9(2), 219-231.Available at: https://doi.org/10.5296/ijafr.v9i2.11861. Aribaba, F. O., Ahmodu, O. I., Ogbeide, S. O., & Olaleye, J. O. (2017). Dividend policy and share price changes in the stock market: Evidence from Nigeria. Journal of Business and Organizational Development, 9(4), 30-47. Arsalan, I., Raza, H., Aslam, M. F., & Mubeen, M. (2016). Impact of leverages on share price: Evidence from cement sector of Pakistan. Industrial Engineering Letters, 6(6), 44-48. Asadi, A. (2013). Examining the relationship between the dividend policy and stock prices in companies listed on Tehran Stock Exchange. Research Journal of Applied Sciences, Engineering and Technology, 6(22), 4186-4191.Available at: https://doi.org/10.19026/rjaset.6.3530. Balagobei, S., & Selvaratnam, P. (2016). Dividend policy and shareholders' wealth of listed manufacturing companies in Sri Lanka. European Journal of Business and Management, 8(25), 40-45. Bhalla, V. K. (2013). Invesment management. Security analysis and portfolio management (19th ed.). New Delhi, India: S. Chand & Company Limited, India. Bhattarai, Y. R. (2016). Effect of dividend payment on stock prices of commercial banks in Nepal: Panel approach. Economic Journal of Development Issues, 21 & 22(1-2), 55- 68.Available at: https://doi.org/10.3126/ejdi.v21i1-2.19023. Black, F. (1996). The dividend puzzle. The Journal of Portfolio Management, 23, 8-12. Brealey, R. A., & Myers, S. C. (1996). Principles of corporate finance (5th ed.). New York: McGraw-Hill Companies Inc. Central Bank of Nigeria. (2018). CBN half year activity report. Abuja: The Central Bank of Nigeria. CFA. (2018). Financial reporting and analysis. UK: Pearson. De Villiers, D., Apopo, N., & Phiri, A. (2020). Unobserved structural shifts and asymmetries in the random walk model for stock returns in African frontier markets. Cogent Economics & Finance, 8(1), 1769348.Available at: https://doi.org/10.1080/23322039.2020.1769348. Egbeonu, O., Paul-Ekwere, L., & Ubani, G. I. (2016). Dividend policy and share price volatility: A co-integration analysis. International Journal of Advanced Academic Research, Business Development and Management, 2(8), 59-75. Ehikioya, B. I. (2015). An empirical investigation of the impact of dividend policy on the performance of firms in developing economies: Evidence from listed firms in Nigeria. International Journal of Finance and Accounting, 4(5), 245-252. Farrukh, K., Irshad, S., Shams Khakwani, M., Ishaque, S., & Ansari, N. Y. (2017). Impact of dividend policy on shareholders wealth and firm performance in Pakistan. Cogent Business & Management, 4(1), 1408208.Available at: https://doi.org/10.1080/23311975.2017.1408208. Gordon, M. J. (1959). Dividends, earnings, and stock prices. The Review of Economics and Statistics, 99-105. Graham, B., & Dodd, D. L. (1934). Security analysis. New York: Whittlesey House, McGraw-Hill Book Co. Harley, W. T., & Duro, A. T. (2017). An Empirical investigation of the impact of dividend policy on performance of quoted companies in a developing economy. Singaporean Journal of Business Economics, and Management Studies (SJBEM), 5(12), 1-7.Available at: https://doi.org/10.12816/0039975. Hirschey, M., & Nofsinger, J. (2008). Investments analysis and behaviour. New York: McGraw- Hill Irwin Companies Inc. Hossin, M. S., & Ahmed, M. F. (2020). Dividend policy and stock price volatility in the Bangladesh capital market: An experimental analysis. Saudi Journal of Economics and Finance, 4(7), 359-367.Available at: https://doi.org/10.36348/sjef.2020.v04i07.008. Koleosho, A. O., Adegbie, F. F., & Ajayi-Owoeye, A. O. (2020). Stock market returns and shareholders' wealth sustainability of companies listed on the Nigerian. Asian Journal of Economics, Business and Accounting, 16(2), 27-45.Available at: https://doi.org/10.9734/ajeba/2020/v16i230233. Lintner, J. (1956). Distribution of income of corporations among dividends, retained earnings and taxes. American Economic Review, 46(2), 97-113.
