Effect of Dividend Policy on Shareholders Wealth in Nigeria (1986 To 2016)


This study investigated the effect of dividend policy on shareholders wealth in Nigeria. Data were generated on market price per share (MPS), dividend per share (DPS), net asset per share (NAPS) and earnings per share (EPS) from annual report and accounts of twenty five quoted companies in  Nigeria stock exchange (NSE) Fact book and daily official list. To analyze the data, the statistical tools that have been used are ordinary least square regressions (OLS), unit root tests, Johansen cointegration and error correction model (ECM) for predicting the dividend policy effect on shareholder’s wealth. The significance of the   various explanatory variables has been tested by computing t-values. To determine the proportion of explained variation in the dependent variable, the coefficient of determination (R2) has been worked out. The significance of R2 has also been tested with the help of F-value. The results show that most of the variable except dividend per share had significant relationship with market price per share. The R2 and F-test shows that earnings, dividend and net assets has combined effect on market price of shares but none of these variables has direct independent influence in determining the price of share in the stock market. This paper, therefore conclude that dividend payout does not have effect on shareholders wealth and shareholders do not react to dividend information. It was therefore recommended that firms operating under this environment should ignore distribution of earning and concentrate with investments that will boost net assets.

Keywords: Dividend Policy, Nigeria, Shareholders Wealth

DOI: https://doi.org/10.37745/ejaafr/vol8.no6.pp15-27.2020

Article Review Status: Published

Pages: 15-27 (Download PDF)

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