Dividend Policy and Earnings Risk Transmission in Nigerian Commercial Banks: A Panel Volatility Approach
Abstract
This study examined the relationship between dividend policy and earnings volatility among quoted commercial banks in Nigeria using a panel GARCH approach. The study adopted a quasi- experimental research design and utilized secondary data obtained from the annual reports and accounts of 14 quoted commercial banks listed on the Nigerian Exchange Group over the period 2016-2025. The analysis incorporates dividend payout ratio, dividend per share, dividend yield, dividend payout stability, and earnings per share as explanatory variables. Results revealed that none of the dividend policy variables exert statistically significant influence on earnings volatility. The variance equation indicates that neither the ARCH term (p = 0.6471) nor the GARCH term (p = 0.5056) achieves significance, suggesting that earnings volatility is not adequately captured by standard volatility specifications. Despite individual coefficient insignificance, the model demonstrates collective explanatory power (R2 = 0.6240), with the Durbin-Watson statistic (1.9376) confirming absence of serious autocorrelation. These findings diverge from theoretical expectations and prior empirical evidence, suggesting that regulatory interventions and macroeconomic volatility dominate firm-level dividend decisions in the Nigerian banking context. The study recommends that bank management prioritize operational efficiency and asset quality over dividend adjustments for earnings stabilization; that financial regulators focus on capital adequacy and risk management as primary stability instruments; and that investors complement dividend analysis with comprehensive assessments of asset quality and management effectiveness.
Keywords
References
More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT
Author: Azubuike, Thankgod Chimene., Amadi, Chukuemeka Robert, Amadi, Sonny, Nwanodi and, Momodu, Ayodele, Augustine
Author: Mbaedee, Alubabari Lah, Nwikina, Christian Gbarawae , Cookey, Ibeinmo Friday
Author: Asuru, Chukwuemema Ekwe Monday, N. Nwankwo PhD Prof. C. G. Nwikina
Author: Veronica Adaku Ihezukwu PhD, Chukwunenye, Ihechukwumere, Onyebueke Kelechi Celestine
Author: Nnedu, Stanley Chinonso Iroh, Cosmas Emeziem Nnamdi Ugochukwu Otiko
