Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Effect of Market Measures of Performance on Dividend Payout of Listed Manufacturing Firms in Nigeria

Zakari Usman, Professor I.A Aliyu, Ibrahim Muhammed PhD

Abstract

This study examines the impact of market-based performance indicators—namely Economic Value Added , Market Value Added , and Total Shareholders’ Return —on the dividend payout decisions of listed manufacturing firms in Nigeria. Recognizing the vital role of the manufacturing sector in driving Nigeria’s economic growth, the research aims to provide insights into how market performance influences dividend policy, with implications for investors, corporate managers, and policymakers. Adopting a quantitative research design, the study employs panel data regression analysis to evaluate the effects of these market metrics on dividend payouts over a defined period. The empirical results reveal that stronger market performance is significantly and positively associated with higher dividend payouts, indicating that firms performing well in the market are more inclined to reward shareholders through dividends. Based on these findings, the study recommends that manufacturing firms prioritize strategies that enhance market value in order to meet shareholder expectations and maintain investor confidence.

References

Adelakun, O. J., & Akintoye, I. R. (2022). Market performance and dividend payout of Nigerian manufacturing firms: Evidence from economic fluctuation periods. International Journal of Finance and Accounting, 11(2), 45–55. Adeniran, A. S., & Bashiru, S. (2013). Dividend payout ratio and performance of deposit money banks in Nigeria. International Journal of Development and Sustainability, 2(2), 437– 448. Alayemi, S. A. (2013). Relationship between dividend payout and financial performance of firms in Nigeria. Research Journal of Finance and Accounting, 4(1), 121–129. Al-Najjar, B., & Hussainey, K. (2009). The association between dividend payout and outside directorships. Journal of Applied Accounting Research, 10(1), 4–19. Amidu, M., & Abor, J. (2006). Determinants of dividend payout ratios in Ghana. Journal of Risk Finance, 7(2), 136–145. Baker, H. K., & Powell, G. E. (2012). Dividend policy in practice: The views of managers. In H. Kent Baker (Ed.), Dividends and dividend policy (pp. 109–127). Wiley. Bhattacharyya, N. (2007). Dividend policy: A review. Managerial Finance, 33(1), 4–13. Biddle, G. C., Bowen, R. M., & Wallace, J. S. (2020). Does EVA beat earnings? Evidence on associations with stock returns and firm values. Journal of Accounting and Economics, 26(3), 301–336. https://doi.org/10.1016/S0165-4101(99)00003-8 Black, F. (1976). The dividend puzzle. Journal of Portfolio Management, 2(2), 5–8. Chukwunonso, A. C., & Egbunike, F. C. (2020). Dividend policy in the Nigerian banking sector: The role of regulatory and market factors. Nigerian Journal of Management Studies, 35(1), 75–89. Ferreira, M. A., & Laux, P. A. (2019). Dividend policy and total shareholder returns: A market- based perspective. Financial Analysts Journal, 75(3), 42–58. https://doi.org/10.1080/0015198X.2019.1596942 Gill, A., Biger, N., & Tibrewala, R. (2010). Determinants of dividend payout ratios: Evidence from United States. The Open Business Journal, 3, 8–14. Grant, J. L. (2003). Foundations of EVA for investment managers. Journal of Portfolio Management, 30(1), 41–48. Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329. Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. American Economic Review, 46(2), 97–113. Myers, S. C. (1984). The capital structure puzzle. Journal of Finance, 39(3), 575–592. https://doi.org/10.2307/2327916 National Bureau of Statistics. (2022). Nigerian Gross Domestic Product Report Q4 2022. Abuja: NBS. Oladimeji, M. S., & Olokoyo, F. O. (2022). Economic value added, market value added, and dividend policy in Nigeria’s industrial sector. Journal of African Financial Studies, 14(1), 22–37. Pandey, I. M. (2010). Financial management (10th ed.). Vikas Publishing House. Pettit, R. R. (1977). Taxes, transactions costs and the clientele effect of dividends. Journal of Financial Economics, 5(3), 419–436. https://doi.org/10.1016/0304-405X(77)90021-X Rafindadi, A. A., & Bello, A. Y. (2019). Market performance and dividend policy: Evidence from listed financial firms in Nigeria. African Journal of Business Management, 13(15), 500–510. https://doi.org/10.5897/AJBM2019.8802 Rappaport, A. (1986). Creating shareholder value: The new standard for business performance. Free Press. Rozeff, M. S. (1982). Growth, beta and agency costs as determinants of dividend payout ratios. Journal of Financial Research, 5(3), 249–259. https://doi.org/10.1111/j.1475- 6803.1982.tb00299.x Sharma, A. K., & Kumar, S. (2010). Economic value added —literature review and relevant issues. International Journal of Economics and Finance, 2(2), 200–220. https://doi.org/10.5539/ijef.v2n2p200 Stewart, G. B. (1991). The quest for value: A guide for senior managers. Harper Business. Walter, J. E., & Gordon, M. J. (1959). Dividends, growth, and the valuation of shares. The Journal of Finance, 14(1), 102–110. Uwuigbe, U., Jafaru, J., & Ajayi, A. (2012). Dividend policy and firm performance: A study of listed firms in Nigeria. Accounting and Management Information Systems, 11(3), 442– 454. Uyemura, D. G., Kantor, C. C., & Pettit, J. M. (1996). EVA for banks: Value creation, risk management, and profitability measurement. Journal of Applied Corporate Finance, 9(2), 94–113. https://doi.org/10.1111/j.1745-6622.1996.tb00284.x

More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH

Effect of Monetary Policy on Profitability of Deposit Money Banks in Nigeria

Author: Stephanie Nguhemen Gbande, Mike T. Soomiyol, Timothy Tyona, Gaius Msendoo Asombo

Cognitive Diversity and Performance of Deposit Money Banks in Nigeria

Author: 1Nwangwu, Okwudiri Iheanyi, 2 Pepple, Grace Jamie PhD

Banking Innovations and Industrial Sector Performance in Nigeria: Evidence from ARDL Model

Author: Peter Ngbede Ajam, Abiodun Edward Adelegan, Benson Emmanuel

Environmental Sustainability and Entrepreneurial Performance in Nigeria: A Case Study of Enugu State

Author: i, Azolike Nkiru Nkechi, ii, Okwor Emmanuel Ejimnkonye, iii, Eneaniofu Daniel Mmaduakonam