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. 9 NO. 7 2024
DOI: 10.56201/ijefm.v9.no7.2024.pg140.153

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The Moderating Effect of Forex Volatility on Dividend Policy and Financial Performance: Empirical Evidence from Nigeria

Otuya Sunday, Akpoyibo Godspower, & Ofeimun, O. Godwin

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Abstract

The study investigated the joint effect of dividend policy and foreign exchange volatility on the financial performance of listed industrial goods firms in Nigeria. The study was anchored on the signaling theory and adopted a panel research design. Population of the study was made up of all 13 industrial goods firms listed on the Nigeria Exchange Group (NGX) as at 31st December 2023. Findings of the study showed that dividend payout ratio significantly reduces financial performance measured as return on equity while forex volatility was found to negatively influence financial performance. The joint effect of dividend payout ratio and forex volatility was negative indicating that fluctuations in foreign exchange rates exacerbate the negative effect of dividend payout ratio on financial performance. Ensuing from our findings, we recommend that industrial goods firms should create a balanced dividend plan between paying out dividends to shareholders and keeping enough money to reinvest in the company.

keywords:

Dividend Policy, Payout Ratio, Retained Profit, Forex Volatility, Return on Equity.

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