Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria
Science Journal of Business and Management
Volume 8, Issue 1, February 2020, Pages: 7-15
Received: Dec. 26, 2019; Accepted: Jan. 8, 2020; Published: Jan. 31, 2020
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Authors
Ubesie Madubuko Cyril, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria
Emejulu Callistus Emeka, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria
Emejulu Callistus Emeka, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria
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Abstract
The study empirically analyzed the relationship between dividend policy and firm’s financial characteristics with a particular focus to consumer goods manufacturing companies in Nigeria. It utilized annual time series secondary data obtained from annual report and financial statements of the selected firms for the period of ten (10) years (2009-2018). Dividend policy was operationalized by Dividend per Share (DPS) and Dividend Payout Ratio (DPR) while the financial characteristics considered were Return on Assets (ROA), Return on Equity (ROE), and Earnings per Share (EPS). Ex-post facto research design was adopted while analytical techniques employed were Pearson Product Moment Correlation (PPMC) and Pairwise Granger Causality analysis mechanism. Findings revealed that Dividend per Share (DPS) interacts positively with the selected firm’s financial characteristics while there is a negative and insignificant relationship between Return on Assets (ROA), Return on Equity (ROE), and Dividend Payout Ratio (DPR) of the selected firms. A positive relationship was maintained between DPR and EPS for the period. Meanwhile, the link between ROA and DPS was significant at 5% level. More so, evidence from the pairwise granger causality test revealed that there is no directional relationship between dividend policy and financial performance of consumer goods manufacturing firms in Nigeria. On this background, the study suggested that the financial system be reformed to enhance the operational efficiency of the financial market so as to determine the profitability of quoted firms via the dividend policy channel. It was also recommended that Managers of consumer goods manufacturing firms in Nigeria should ensure that they have well-structured dividend policies in place as this will make the company shares attractive to investors and however lead to increased stock prices and enhanced profitability.
Keywords
Dividend Policy, Profitability, Pearson Correlation, Pairwise Granger Causality, Manufacturing Firm
To cite this article
Ubesie Madubuko Cyril, Emejulu Callistus Emeka, Emejulu Callistus Emeka, Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria, Science Journal of Business and Management. Vol. 8, No. 1, 2020, pp. 7-15. doi: 10.11648/j.sjbm.20200801.12
Copyright
Copyright © 2020 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.
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