Dividend Policy and the Profitability of Selected Quoted Manufacturing Firms in Nigeria: An Empirical Analysis
Journal of Finance and Accounting
Volume 4, Issue 4, July 2016, Pages: 212-224
Received: May 23, 2016; Accepted: Jun. 12, 2016; Published: Jul. 6, 2016
Views 6224      Downloads 446
Henry Waleru Akani, Department of Banking and Finance, Faculty of Management Science, Rivers State, University of Science and Technology Nkpolu, Port Harcourt, Rivers State, Nigeria
Yellowe Sweneme, Department of Banking and Finance, Faculty of Management Science, Rivers State, University of Science and Technology Nkpolu, Port Harcourt, Rivers State, Nigeria
Article Tools
Follow on us
This paper examined the impact of dividend policy on the profitability of selected quoted manufacturing firms in Nigeria from 1981 – 2014. The objective was to investigate the existing relationship between dividend policy and profitability of the selected quoted manufacturing firms in Nigeria. Time series data were computed from financial statement of the selected quoted manufacturing firms and stock exchange factbook. Return on Investment (ROI) and Net Profit Margin (NPM) were modeled as our dependent variables while Dividend Payout Ratio (DPR), Retention Ratio (RR), Dividend Yield (DY) and Earnings per Share (EPS) were proxied as our independent variables. Multiple regressions with the aid of Statistical Package for Social Sciences Research (SPSS) were used as data analyses techniques. Multi co-linearity, co-linearity, Durbin Watson, F-statistics and regression coefficient were used to determine the dynamic relationship between the variables. Findings revealed that all the independent variables have positive relationship with the dependent variables except dividend yield. The study recommends that operational efficiency of Nigerian financial market should be deepened and management should strengthen its effort for effective dividend policy that will increase the profitability of the quoted manufacturing firms Nigeria.
Dividend Policy, Profitability, Quoted Manufacturing Firms, Return on Investment and Net Profit Margin
To cite this article
Henry Waleru Akani, Yellowe Sweneme, Dividend Policy and the Profitability of Selected Quoted Manufacturing Firms in Nigeria: An Empirical Analysis, Journal of Finance and Accounting. Vol. 4, No. 4, 2016, pp. 212-224. doi: 10.11648/j.jfa.20160404.17
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Aburime, T. U., (2008), Determinants of Bank Profitability; Macroeconomic Evidence from Nigeria. (available @SSRNhp:ssrn.com/abstract=123 004)
Adelegan, O., (2001). The impact of growth prospect, leverage and firm size on dividend behaviour of corporate firms in Nigeria. International journal of finance and management, 3 (6), 432-511.
Adesola, O., & Okowomg, E. W., (2009). Determinants of dividend policy of Nigeria listed firms. International Journal of Finance and Economics, 12 (8), 98-124.
Adesola, W. A., (2004). An empirical study of dividend policy of quoted firms in Nigeria. An unpublished M.Sc thesis, university of Calabar.
Agrawal, S. G., & Jayaraman, R., (2004). Mechanism of dividend payment and leverage policy. Journal of accounting research 21 (2), 562-592.
Allen, C., (2002). Dividend policy and stock price volatility: Australian Evidence. Journal of applied economics, 6 (9), 175-218.
Alli, K., Khan, A., & Ramirez, G., (1993). Determinants of dividend policy: A factorial analysis. International journal of finance 17 (28), 523-547.
Alstadsaeter, A., & Fjaerli, E., (2009). Neutral taxation of shareholder income? Corporate responses to an announced dividend tax. International journal of finance, 7 (9), 179-211.
Amidu, M., & Abor, J., (2006). Determinants of dividend payout ratios in Ghana. Journal of risk management and finance 5 (7), 136-145.
Amidu, M., (2007). How does dividend policy affect performance of the firm on Ghana stock Exchange? Investment Management and Financial Innovations, 4 (2), 104 – 112.
Amihud, M., (2004). Dividends, taxes, and signaling: Evidence from Germany. Journal of finance 6 (8), 397-408.
Amsterdam, E., & Damodaran, A., (2006). Valuation approaches and metrics: A survey of the theory and evidence. Stern School of Business, 23 (9), 1279-1487.
Arnott, D., and Asness, S., (2003). Surprise higher dividends are higher earnings growth. Financial Analyst Journal, 7 –87.
Azhagaiah, R., (2008). The Impact of dividend policy on shareholders wealth. Research Journal of Finance and Economics, 4 (6), 53-92.
Baker, H. K., Farrelly, G. E., Edelman, R. B., (1985). A survey of management views on dividend policy. International journal of finance Management 14 (13) 1q, 1007-1134.
Baker, H. K., Powell, G. E., (2000). Determinants of corporate dividend policy: A survey of NYSE firms. Journal of finance, 9 (17), 29-40.
Baskin, J., (2005). Dividend policy and the volatility of common stock. Journal of portfolio management, 15 (3), 19-25.
Battacharya, S., (2001). Imperfect information and dividend policy and the ‘bird in hand’ fallacy. The bell Journal of Economic 10 (11), 259-270.
Bitok, J., (2004). The effect of dividend policy on the value of the firms quoted at the Nairobi stock exchange. Unpublished MBA project, University of Nairobi.
Black, F., (2001). The effects of dividend yields and dividend policy on common stock prices and return. Journal of financial economics 1 (1), 478-531.
Brittain, J. A., (1964). The tax structure and corporate dividend Policy. Economic review 272-287.
Brook, Y., Chalton, W., & Hendershott, R., (1998). Do firms use dividends to signal large future cash flow increase? International journal of finance management 9 (27), 46-57.
Chebii, E., Kipchumba, S. and Wasike, E., (2011). Relationship between firm’s capital structure and dividend payout ratios: Companies listed at Nairobi Stock Exchange (NSE). Unpublished dissertation for Egerton University and Kabarak University.
Chehab, A. F., (1995). Essays on the determinants of capital structure. University of New Orleans.
Chen, J., (2009). Determinants of dividend policy: The evidence from New Zealand. International research journal of finance and economic.
Collins, M. C., Saxena, A. K., Wansley, J. W., (1996). The role of insiders and dividend policy: A comparison of regulated and unregulated firms. Journal of finance strategic 7 (9), 1-9.
Dagogo, D. W., & Obara, L, C., (2015). Comparative analysis of earnings rate, retention rate and dividend yield as determinants of capital growth. International journal of economics and finance, 7 (2), 214-223.
Dhillon, U. P., (1986). Corporate ownership, dividend policy, and capital structure under asymmetric information. Louisiana State University, Agricultural & Mechanical College 15 (8), 563-678.
Diamond, J., (2005). Earnings distribution and the evaluation of shares: Some recent evidence. Journal of financial and quantitative analysis, 2(01), 15-30.
Dickey, D., & Fuller, W., (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 17 (49), 1057 – 1072.
D'Souza, J., (1999). Agency cost, market risk, investment opportunities and dividend policy an international perspective. Managerial Finance (7) 25, 35-43.
Engel, R. F., & Granger, W. J., (1987). Cointegration and error correction models in Econometrica, 5 (17) 1062 – 1356.
Eriki, O., & Okafor, C., (2002). Dividend and stock prices on the Nairobi Stock exchange accounting: The Nairobi Perspective. European journal of finance, 12 (9), 448-497.
Eriotis N., (2005). The effect of distribution earnings and size of the firms to its dividend policy. Some Greek Data. International Business and Economic Journal 4 (1), 67-74.
Ezirim, B. C., (2005). Finance dynamics: Principle, techniques and application. Markowitz Centre for Research and Development.
Fama, F., (2001). Agency costs of free cash flow, corporate finance and takeovers. America economic review, (23) 76, 323-329.
Fama, F., (2001). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of financial and quantitative analysis 27 (2), 247-263.
Fama, E., & Bablak, H., (1968). Dividend policy of individual firms: An empirical analysis. Journal of the American Statistics Association, 63, 1132-1161.
Farrar, D. E., Selwyn, L. L., (1967). Taxes, corporate financial policy and return to investors. National tax Journal (9) 20, 444-462.
Farsio, F., Geary, A. & Moser, J., (2004). The relationship between dividends and earnings. Journal for Economic Educators, 4 (4), 1–5.
Gordon, M. J. (1959). Dividends, earnings and stock prices. The review of economics and statistics, 41 (2), 99-105.
Gordon, M., (1962). The savings, investment and valuation of a corporation. Review of Economics and Statistics, 37-51.
Graham, B., Dodd, D. & Cottle, S., (1962). Security analysis, 1st Edition. McGraw-Hill, New York.
Granger, C. N. J., (1969). Investigating casual relationship by econometrics models and cross-spectral methods. Econometrica, 9 (37), 424 – 438.
Gupta, M. C., & Walker D. A., (1975). Dividend disbursal practice in commercial banking. Journal of financial and Quantititive Analysis, 10 (3), 515-529.
Hakansson, N., (2006). To pay or not to pay dividend. The Journal of finance, 37 (2), 415-428
Harkavy, O., (2005). The relation between retained earnings and common stock: Prices for large listed corporations. Journal of finance, 8 (3), 283-297.
Hashemiyoo, A., (2012). The impact of initiating dividend payments on shareholders' wealth. Journal of business 12 (8), 77-96.
Higgins, R. C., (1972). The corporate dividend-saving decision. Journal of finance quantitative analysis, 7 (11) 1527-1741.
Higgins, R. C., (1981). Sustainable growth under inflation. International journal of finance management, 7 (10) 36-40.
Howatt, B., (2009). Dividends, earnings, volatility and information. Applied Financial Economics, 19 (7), 551 – 562.
Inanga, E., (2011). Dividend policy in an era of indigenization: A comment. Nigerian journal of economics and social studies. 17 (2), 133-147.
Johansen, S., & Juselius, C., (1990). Maximum likelihood estimation and interference on cointegration with application to demand for money. Oxford Bulletin of Economics on statistic, 15 (54), 169–210.
Johansen, S., (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector auto regressive model. Econometrica, (23) 59, 1551–1580.
Kalay, A., (1982). The ex-dividend day behaviour of stock prices: A re-examination of the clientele effect. Journal of finance, 37 (14), 1052-1070.
Kalay, A., (1982). The ex-dividend day behaviour of stock prices: A re-examination of the clientele effect. Journal of finance, 37 (17), 1052-1070.
Kempness. T., (1980). A handbook of management. Penguin book United Kingdom.
Kinif, T., (2011). Determinants of dividend payout: An empirical study on banking industry in Ethiopia 2006-2010. (Unpublished master Thesis). Addis Ababa University.
Kioko, M., (2006). An analysis of the relationship between dividend changes & future profitability of companies quoted at the Nairobi Stock Exchange. Unpublished MBA project, University of Nairobi.
Kutpsoyiannis, A., (1997). Theory of Econometrics. Hampshire macmillan press Ltd.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R. W. (2000). Agency Problems and Dividend Policies around the World. The Journal of Finance 55, 1-33.
Lawrence, J., (2006). Principles of managerial finance. Journal of financial Studies & Research, 32 (8), 457-479.
Lease, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W., (2000). Agency Problems and Dividend Policies around the World. The Journal of Finance 55, 1-33.
Lie, E., (2005). Financial flexibility, performance, and the corporate payout choice. The Journal of Business, 78 (6), 2179–2202.
Linter, J., (1956). Distribution of incomes of corporations among dividends, retained earnings and taxes. An Economic Review 17 (46), 97-113.
Litzenberger, R. H., & Ramaswamy, K., (1979). The effects of personal taxes and dividends on capital asset prices: Theory and empirical evidence. Journal of financial economics, 12 (7), 163-195.
Lloyd, W. P., Jahera, S. J., Page, D. E., (1985). Agency cost and dividend payout ratios. Quantitative Journal of Business Economics, 12 (24), 19-29.
Luke, W., (2011). Company dividend policy in Nairobi: An empirical analysis. The Nairobi Journal of economic and social studies, 9 (8), 315-337.
Masulis, R. W., Trueman, B., (1988). Corporate investment and dividend decisions under differential personal taxation. Journal of finance and quantitative Analysis, 8 (23), 369-386.
Miller, M. H. & Modigliani, F., (1961). Dividend policy, growth and the valuation of shares. The Journal of Business, 34, 411-433.
Miller M. (1959). Dividend policy, growth and the valuation of shares. Journal of business, 34 (4) 411-430
Miller, M., (1959). Dividends and taxes. Journal of financial economics, 6 (4) 333-64.
Mizuno, M. (2007). Payout Policy of Japanese firms analysis on the survey of four industries listed on the Tokyo Stock Exchange. Pacific Economic Review, 12 (5), 631–650.
Modigliani, F., (1982). Debt, dividend policy, inflation and market valuation. Journal of finance 8 (37), 255-273.
Muchiri, J., (2006). Determinants of dividend payout: The case of listed companies in Kenya. Unpublished MBA project, University of Nairobi.
Mundi, H., (2006). The relationship between earning per share and dividend per share of Nigeria listed firms. European journal of finance and management, 4 (7), 12-28.
Nissim, D. and Ziv, A. (2001). Dividend changes and future profitability. Journal of finance, 56 (6), 2019–65.
Okpara, G (2010). A diagnosis of the determinants of dividend payout policy in Nigeria: A Factor Analytical Approches. American Journal of Scientific Research, 8, 57-67.
Olowe, R. A., (2011). The impact of 2004 banking capital announcement on the Nigeria stock market. African Journal of Economies and Management, 2 (2), 180-201.
Omran, M., & Pointon, J., (2004). Dividend policy, trading characteristics and share prices: Empirical evidence from Egyptian firms. International Journal theory and applied finance 3 (7), 121-130.
Onoh, J. K., (2002). Dynamics of money banking and finance in Nigeria: An emerging market. Astra Meridian publishers, Aba, Enugu, Lagos.
Pandey, I. M., (2005). Financial management, 9th edition. Vikas publishing house pvt ltd
Pandey, M (2003). Corporate dividend Policy and behaviour the Malaysian evidence. Asian Academy of Management Journal, 8 (1), 17–32.
Parua, A., & Gitman, A., (2009). Dividend history and determinants in selected Indian companies. Australasian Accounting Business and Finance Journal, 3 (4), 45-86.
Petit, R., (2004). The impact of dividend and earnings announcements: A Reconciliation. Journal of business, 17 (76), 86 -96.
Pettit, R., (2004). Taxes, transactions costs and the clientele effect of dividends. Journal of Financial Economics, 5 (3), 419-436.
Pruitt, S. W., & Gitman, L. W., (1991). The interactions between the investment, financing, and dividend decisions of major US firms. Journal of Finance Review 19 (26), 409-430.
Ramcharran, H., (2001). An empirical model of dividend policy in emerging equity markets. Emerging markets quarterly, 5, 39-49.
Rozeff, M., (2005). Growth, beta and agency costs as determinant of dividend payout ratios. Journal of Financial Research, 7 (12), 249-59.
Rozeff, S. M., (1982). Growth, beta and agency cost as determinants of dividend payout ratios. Journal of finance 4 (5), 411-33.
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
Tel: (001)347-983-5186