DIVIDEND POLICY AND FINANCIAL PERFORMANCE: A SURVEY OF SELECTED QUOTED FIRMS IN NIGERIA
The issue of dividend policy in corporate organization has continued to be one of the most challenging and controversial issues in corporate finance and financial economics as decision makers are often confronted with the problem of reconciling observed dividend behavior with economic incentives. This paper examines the relationship between dividend policies and financial performance of selected listed firms in Nigeria. Data were sourced through secondary means from the annual reports of the sampled quoted firms and was analyzed using panel data regression model. Two models were developed in an attempt to provide a theoretical explanation on the birds-in-hand dividend relevance theory and the Modigliani and Miller’s (MM) dividend irrelevance theory. The result from the findings shows an insignificant relationship between dividend payout ratio and financial performance of the selected quoted firms in Nigeria from the first model, while the result from the second model shows a significant but inverse relationship between dividend payout ratio and earnings per share, implying that companies retained earnings as a means of increasing their earnings per share. Based on the findings, the study recommends that firms should maintain a reduced but stable dividend payout in order to increase internal finance, market valuation and in the long run maximizes the shareholder wealth.
