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

Dividend Policy and Financial Performance of Commercial Banks in Nigeria

Ibiam, Samuel Orji , Okafor, Okafor Okpan

Abstract

The study examined the effect of dividend policy on the performance of commercial banks in Nigeria. To achieve the objective of the study ex-post facto research design was adopted. The population of the study is made up of 14listed commercial banks in Nigeria. The study used cluster sampling approach to select the eight (8) commercial banks with international authorization in Nigeria. Secondary data were used through the use of annual reports and accounts of the selected commercial banks. Data were analyzed using panel data based multiple regression analysis. The findings revealed that (i) Dividend payout ratio has no significant impact on the performance of quoted commercial banks in Nigeria. (ii) Earnings per share has a significant impact on the performance of quoted commercial banks in Nigeria. Dividend retention ratio has a significant impact on the performance of quoted commercial banks in Nigeria. (iv) Dividend yield ratio has a significant impact on the performance of quoted commercial banks in Nigeria. The study recommends that the board of directors should formulate and revise dividend policy by taking into consideration the factors that have been evidenced to exercise significant influence on dividend payment. Board of directors should consider increasing the dividend payment to shareholders, by giving attention to the factors of board independent, board size, profitability, leverage, firm size, financial crisis and political factor. This is important, as the dividend policy is a crucial factor in retaining existing investors as well as attracting new investors. Also, management should adopt optimal dividend policy that would better the lots of shareholders both in the short-run and long-run should be adopted.

Keywords

Dividend payout ratioearnings per sharedividend retention ratiodividend yield ratio and return on asset.

References

Abiola, E. R. (2014). Effect of dividend policy on profits and growth of banking firms in Nigeria. International Journal of Management Sciences, 9(7),121-139. Adebayo, B. D. (2015). Impact of dividend policy decision on corporate performance of listed firms in Nigeria. International Journal of Advances in Management and Economics 12(4),1-20. Adebola, E. C., &Osibanjo, V. A (2016). Determinants of dividend policy: A study of selected firms in Nigeria. Change and Leadership Journal, 17(9),1-17. Adebola, F. N. (2015). Dividend policy and payment ratio: Evidence from the Kuala Lumpur Stock Exchange. The Journal of Risk Finance, 8(4),349-363. Ademolekun, D. B. (2013). Determinant of dividend policy in emerging stock exchanges. Global Economy & Finance Journal, 2(2), 38-63. Akinleye, J. K., &Ademiloye, B. C. (2018). Dividend policy and performance of quoted manufacturing firms in Nigeria. Journal of Economics and Management, 5(3),1-19. Akinsulire, E. R. (2016). Determinants of dividend payout policy of listed financial institutions in Ghana. Research Journal of Finance and Accounting, 14(7),112-138. Alexander, (2016). Determinants of dividend policy: A case of banking sector in Pakistan. Middle-East. Journal of Scientific Research. 18(3),410-424. Anike, E. C. (2014). Impact of dividend yield on stock prices of Nigerian banks: The impact of earnings yield on stock prices of Nigeria banks and the impact of payout ratio on stock prices of Nigeria banks. Management Science journal, 9(8),1-19. Chandra, R. H. (2014). The determinants of corporate leverage and dividend policies. Journal of Applied Corporate Finance, 7,4-19. Chumari, E. B. (2014). Determinants of dividend payout ratio- A study of Indian information technology sector. International Research journal of Finance and Economics Issues, 15,63-71. Dele, E. R. (2014) Ownership structure and dividend policy: evidence from Malaysian companies. International Review of Business Research journals, 6(1):170-180. George, E. B. (2015). Dividend Payout Ratio and Performance of Deposit Money Banks in Nigeria. International Journal of Advances in Management and Economics, 14(8),98- 105. Gill, C. A., Biger, E. R., &Tibrewala, L. S. (2010). Mediating Effect of Liquidity on Firm Performance and Dividend Payout of Listed Manufacturing Companies in Nigeria. Journal of Economic Development, Management, Information Technology, Finance and Marketing, 8(1),15-35. Gordon, U. (1963). The Camel Rating System in Banking Supervision, A case Study. Harvey, C. C., &Ayodele, B. C. (2017). Impact of dividend policy on performance of quoted companies in a developing economy. Journal of Management Sciences, 14(9),1-18. Idewele, E. D., & Murad, E. C. (2018). Dividend policy and financial performance: A study of selected deposit money banks in Nigeria. Kennedy, N. (2015). “Price Adjustments on the Johannesburg for Announcement of Share Dividends”, Investment Analysts Journal, 46: 35-44. Miller, M. H. & Modigliani, F., (1961). Corporate income taxes and the cost of capital: A correction. The American Economic Review, 53, 433–443. Morakinyo, S. G. (2018). “The Changing Role of Dividend: A Firm-Level from the Nineteenth to the Twenty-First Century”, The Canadian Journal of Economics, 39(4), 1316-1344. Munenelaiboniin, N. A. (1972), “The Impact of Unexpected Earnings and Dividends on Abnormal Returns to Equity”, Accounting and Finance, 29: 1-19. Musyoka, K., (2015). Business conditions and expected returns on stocks and bonds. Journal of Financial Economics 25, 23-49 Naum .J. (2014). Dividend Policy, Theory and Practise. Retrieved from https://books.google.com. Nuredin, W. M., (2012). Effects Of Profitability On Dividend Pay-out by Commercial and services Firms Listed In The Nairobi Securities Exchange, European Nwachukwu, R. (2015). “Dividend Behavior and Dividend Signaling”, The Journal of Financial and Quantitative Analysts, 35(2), 173-189. Ogundele, P. & George, K. (2016). “Earnings Information Conveyed by Dividend Initiations and Omissions”, Journal of Financial Economics, 21: 149-175. Omilabu, E. B., Alao, B. C., & Situ, E. C. (2018). Dividend policy on the profitability of selected banks in Nigeria using a time frame of 2011 to 2015. International Journal of Advanced Research in Engineering & Management, 1(9), 60-86. Omilabu, I. Alao, M. & Situ, T. (2004). Dividend Policy; Dividend Fundamentals. Retrieved from primefile.bid/dividend- and-dividend policy. Onuoha, E. B. (2015). Impact of performance on dividend payout ratio of some selected deposit money banks in Nigeria spinning the period between 2004 and 2013. European Journal of Accounting, Auditing and Finance Research 3(11), 40-59. Pandey, S. S. (2013). Effect of dividend policy on firm’s financial performance: Econometric analysis of listed manufacturing firms in Kenya. Research Journal of Finance and Accounting, 5(12): 136-144. Turakpe, N. &Legaaga, F. (2017), “A Seasonality in the Pakistani Equity Market: The Ramadan Effect”, The Pakistan Development Review, 37: 77-81. Usman, S. C., &Olorunnisola, B. N. (2018). Effects of dividend policy on corporate performance of deposit money banks in Nigeria. International Journal of Economices Commerce and Management, 3(2), 1-11. Uwuigbe, D. C. (2012). Effect of dividend policy on the market price of shares in Nigeria: Case study of fifteen quoted companies. International Journal of Accounting, 2(1),78- 89. Uwuigbe, F. B., &Jararu, S. B. (2012). Relationship between dividend payout and firms’ performance: Evaluation of dividend policy of Oando Plc. International Jouranl of Contemporary Applied Sciences, 2(6), 56-71. Waheed, C. S. (2012). Effect of Dividend Policy on the Financial Performance of Firms Listed at the Nairobi Securities Exchange (Unpublished MBA Research Project, University of Nairobi, Kenya. Yusuf, P. L., &Suleman, E. R. (2015). Information content of concurrently announced earnings, cash dividends, and stock dividends: An investigation of the Chinese stock market. Journal of International Financial Management and Accounting, 12(3),101- 124.