IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 4 NO. 3 2019

---

Effect of Dividend Policy on Stock Prices: Evidence from Nigeria

Alfred C. Osakwe, Vincent N. Ezeabasili, and Jessie I. Chukwunulu

---

Abstract

The study examined the effect of dividend policy on stock prices with empirical evidence from Nigeria. The study employed dividend yield (DY), dividend pay-out ratio (DPO), earnings per share (EPS) as the dividend policy variables and net asset per share (NAPS) as control variable of firm size. The dependent variables and proxy for stock prices is the market price share (MPS). Data were obtained from financial statements of 10 consumer goods firms quoted in Nigerian stock exchange. The panel data covering a period of five years from 2011 to 2015 were used. A panel least square regressions technique was employed. The results showed that DY has an insignificant negative effect on MPS, DPO has a significant positive effect on MPS, EPS has a significant positive effect on MPS while NAPS has an insignificant positive effect on MPS. The study thus concludes that dividend policy is capable of influencing the stock prices in consumer goods sector of the Nigerian stock market indicating that the theory of irrelevancy of dividends do not hold in the case of Nigeria

keywords:

Dividend policy, stock prices, Nigerian Stock Exchange, earnings per share

---

References:

Adeleke, S. S. &Obademi, O. E. (2013). The impact of dividend policy on shareholders
value: evidence from Nigeria. Retrieved from http://www.unilag.edu.ng/opendoc.php
?sno=28193&doctype=doc&docname=The%20impact%20of%20dividend%20policy%
20on%20shareholders%20value:%20Evidence%20fron%20Nigeria.

Al- Hasan, M. A., Asaduzzaman, M. & Al Karim, R. (2013). The effect of dividend policy on
share price: An evaluative study. IOSR Journal of Economics and Finance, 1(4), 6 -11.
Retrieved from http://www.iosrjournals.org/iosr-jef/papers/vol1-
issue4/B0140611.pdf?id=7841.

Al Masum, A. (2014). Dividend Policy and Its Impact on Stock Price – A Study on
Commercial Banks Listed in Dhaka Stock Exchange. Global Disclosure of Economics
and Business, 3(1), 9 – 17. Retrieve from http://publicationslist.org/data/gdeb/ref-
10/GDEB_5th_Issue_1.pdf.

Al-Kuwari, D. (2009). Determinants of the dividend policy in emerging stock exchanges.
Global Economy & Finance Journal, 2(2), 38 – 63

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

Ansar, I., Butt, A. & Shah, S. B. (2015). Impact of dividend policy on shareholder’s wealth.
International Review of Management and Business Research, 4(1), 89 – 95. Retrieved
from https://www.irmbrjournal.com/papers/1425719808.pdf.

Attah-Botchwey, E. (2014).The impact of dividend payment on share price of some selected
listed companies on the Ghana stock exchange. International Journal of Humanities
and Social Science, 4(9), 179 – 190. Retrieved from
http://www.ijhssnet.com/journals/Vol_4_No_9_1_July_2014/21.pdf.

Black, F. & Scholes, M. (1974). The effects of dividend yield and dividend policy on
common stock prices and returns. Journal of Financial Economics, 1 (1), 1-22.

Black, F. (1976). The dividend puzzle.Journal of Portfolio Management, 2(1), 1-22.

Booth, L. & Cleary, W. S. (2010).Dividend Policy. An Introduction to Corporate Finance,
Canadian: 2nd edition, John Wiley and Sons.

De Wet, J. &Mpinda, M. (2013). The impact of dividend payments on shareholders’ wealth:
evidence from the Vector Error Correction Model. International Business & Economics
Research Journal, 12(11), 1451 – 1466. Retrieved from
https://www.cluteinstitute.com/ojs/index.php/IBER/article/download/8182/8221

DeAngelo, H., DeAngelo, L., &Stulz, R. (2006). Dividend Policy and the earned/contributed
capital mix: a test of the life-cycle theory. Journal of Financial Economics, 81, 227-
254.

Eniola, O. J. &Akinselure, O. P. (2016). Impact of dividend policy and earnings on selected
quoted companies in Nigeria. International Journal of Innovative Research and
Development, 5(6), 450 – 460. Retrieved from
http://www.ijird.com/index.php/ijird/article/viewFile/95087/70013.

Glen, J.D., Karmokolias Y., Miller R. R, and Shah S. (1995), “Dividend Policy andin
Emerging Markets”, International Financial Corporation. Discussion PaperNo 26.

Gordon, M. J. (1959). Dividend, Earning, and Stock Prices, The Review of Economics and
Statistics, 41, 99-105.

Gordon, M. J. (1963). The Savings Investment and Valuation of a Corporation.The Review of
Economics and Statistics, 44, 37-51.

Huda, F. & Farah, T. (2011). Determinants of Dividend Decision: A Focus on Banking
Sector in Bangladesh, International Research Journal of Finance and Economics, 77,
3-46.

Jakata, O. &Nyamugure, P. (2014). The effects of dividend policy on share prices: Empirical
evidence from the Zimbabwe stock exchange.International Journal of Science and
Research, 4(10), 674 – 683. Retrieved. From
https://www.ijsr.net/archive/v4i10/SUB158636.pdf.

Kazman, R., Klein, M., Barbacci, M., Longstaff, T., Lipson, H., &Carriere, J. (1998). The
architecture tradeoffanalysismethod. Paper presented at the Engineering of Complex
Computer Systems, 1998. ICECCS'98. Proceedings.

Khan, M. N., Nadeem, B. N., Islam, F., Salman, M. & Gill, H. M. I. S. 2016). Impact of
dividend policy on firm performance: An empirical evidence from Pakistan stock
exchange. American Journal of Economics, Finance and Management, 2(4), 28-34.
Retrieved from http://files.aiscience.org/journal/article/pdf/70200100.pdf.

Kibet, T. W., Jagongo, A. O. &Ndede, F. W. S. (2016). Effects of dividend policy on share
price of firms listed at theNairobi securities exchange, Kenya. Research Journal of
Finance and Accounting, 7(8), 220 – 230. Retrieved from http://www.ku.ac.ke/schools
/business/images/stories/research/effect-of-dividend-policy-on-share-price-of-firms.pdf.

Lintner, J. (1962). Dividends, earnings, leverage, stock prices and supply of capital to
corporations. The Review of Economics and Statistics, 44, 243-269.

Lintner, J. (1956). Distribution of Incomes of corporations among Dividends, Retained
Earnings, and Taxes, American Economic Review, 46, 97-113.

Litzenberger, R. H. &Ramaswamy, K. (1982).The effect of dividends on common stock
prices: tax effects or information effects? Journal of Finance, 37(2), 429-443

M’rabet, R. &Boujjat, W. (2016). The relationship between dividend payments and firm
performance: A study of listed companies in Morocco. European Scientific Journal,
12(4), 469 – 482. Retrieved from
http://eujournal.org/index.php/esj/article/download/7011/6734.
Miller, M. & Modigliani, F. (1961). Dividend policy, growth and the valuation of shares.
Journal of Business, (34) 411-433.

Mokaya, S. O., Nyang’ara, D. M. & James, L. T. (2013). The effect of dividend policy on
market share value in the banking industry: The case of National Bank of Kenya.
International Journal of Arts and Commerce, 2(2), 91 – 101. Retrieved from
http://www.ijac.org.uk/images/frontImages/gallery/Vol._2_No._2/10.pdf.

Murekefu, T. M. &Ouma, O. P. (2013). The relationship between dividend payout and firm
performance: A study of listed companies in Kenya.European Scientific Journal, 8(9),
199 – 215. Retrieved from http://eujournal.org/index.php/esj/article/viewFile/156/161

Nissim, D., &Ziv, A. (2001). Dividend Changes and Future Profitability. Journal of Finance,
56(6), 2019–65.

Nwude, C. E. (2003), Basic Principles of Financial Management. A Second Course: 1st
edition Enugu: ChukeNwude Nigeria.

Ordu, M. M., Enekwe, C. I. &Anyanwaokoro, M. (2014). Effect of dividend payment on the
market price of shares: A study of quoted firms in Nigeria. IOSR Journal of Economics
and Finance, 5(4), 49-62. Retrieved fromhttp://www.iosrjournals.org/iosr-
jef/papers/Vol5-Issue4/G0544962.pdf.

Ozuomba, C. N., Anichebe, S. A &Okoye, P. V. C. (2016). The effect of dividend policies on
wealth maximization – a study of some selected Plcs. Cogent Business & Management,
3, 1 – 15. Retrieved from
https://www.cogentoa.com/article/10.1080/23311975.2016.1226457.pdf.

Pandey, I. M. (2003). Corporate dividend policy and behaviour the Malaysian evidence.
Asian Academy of Management Journal, 8(1), 17 – 32.

Pandey, M. I. (2005). Financial Management (9th ed.). New Delhi: Vikas publishing House
Pvt Limited.

Priya, S. &Azhagaiah, R. (2008). The impact of dividend policy on shareholders’ wealth.
International Research journal of Finance and Economics, 20, 181-187.

Priya, K. &Nimalathasan, B. (2013). Dividend policy ratios and firm performance: a case
study of selected hotels & restaurants in Sri Lanka. Global Journal of Commerce and
Management Perspective, 2(6), 16-22. Retrieved from https://www.researchgate.net/
profile/Nimalathasan_Balasundaram/publication/259573053_Dividend_Policy_Ratios_
and_Firm_Performance_a_case_study_of_Selected_Hotels_Restaurants_in_Sri_Lanka/
links/00b7d52ca7f589cbdb000000.pdf

Shukla, O. (2011). Conceptual Framwork of Dividend. Retrieved from
shodhganga.inflibnet.ac.in/bitstream/10603/3313/.../08_chapter%202.pdf.

Stulz, R. M. (2000). Merton Miller and modern finance. Financial Management, 29(4), 119–
131.

Uwuigbe, U., J

DOWNLOAD PDF

---

Back