Determinants of Dividend Policy of Manufacturing Firms in Nigeria
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Date
2021-11-18
Authors
Adelegan, O. Janet
Adeyemo, Kabiru
Adejuwon, Joshua
Taiwo, Adewale
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
The study set out to identify the determinants of dividend policy of firms in Nigeria
from 1984 to 2020. Using the modified Lintner model as the theoretical framework, we
analyze data on listed Nigerian manufacturing firms for 1,101 firm-years from 1984 to
2020. Data on dividend, profit after tax, total distributable earnings, leverage, turnover
growth, firm size and market to book value were obtained from annual reports of
firms. Results of sectoral analysis show that manufacturing firms’ dividend policies
depend on profit after tax, preceding year dividend, size and growth of firms. The
results also show that the manufacturing firms’ dividend payout depends more on
profit after tax and past dividend and in general the objectives of the firm. However,
there is enough evidence to conclude that profit after tax and past dividend are key
determinants of firm dividend payment in Nigeria. There is need for firms to improve
on their performance and increase their profitability level to have enough to transfer
to revenue reserves for future dividend payments, especially when there is recession
in the economy, as dividend payment is a key factor in growing investors’ confidence,
and in enhancing the market values of firms.
Description
Keywords
Dividend, , Profit, , Total distributable earnings, , Leverage, , Market to book value