Dividend Policy and Wealth Creation by Firms Quoted on the Nigeria Stock Market: A Study of NSE-30 Index
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Date
2015-01
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Redeemer's University Journal of Management and Social Sciences ·
Abstract
Dividend policy has remained one of the most important issues in Corporate Finance. This
study examined the relationship between the proxy of dividend policy, dividend payout ratio
and the proxies of firms’ wealth creation like capital structure, profits and investment. Panel
Least Squares (PLS) regression model was used to investigate the effect of dividend policy on
wealth creation by firms in Nigeria. Data were extracted from the financial statements of 30
firms listed on the Nigerian Stock Exchange Index (NSE-30 Index) and the NSE Fact Books
for the period 2004 to 2010. The results showed that, in isolation, while capital structure had
significant negative effect on dividend payout (t-stat p-value = 0.0089 < 0.05), profitability
had significant positive effect (t-stat p-value = 0.0000 < 0.05); but fixed asset-dominated
investment had insignificant negative effect as evidenced by t-stat p-value = 0.5969 >
0.05level of significance. On the aggregate, the wealth creation indices jointly significantly
determined dividend policy of the firms as evidenced by the p-value of the F-statistic (p-value
= 0.0000 < 0.05). This indicated that though wealth creation significantly determined
dividend policy of the firms, payouts were explained more by factors other than these
components of firms’ wealth creation in Nigeria.