Abstract
Previous evidence has shown that numerous factors influence dividend policy, but how political uncertainty affects a firm’s cash dividend policy remains blurry. This study examines the relationship between cash dividends and political uncertainty in Nigeria. More so, the study analyses whether this relationship prevails on matured and non-matured firms. The study employed ordinary least squares dummy variable (LSDV) approach with robust standard error on a data set of non-financial listed Nigerian firms. The results revealed that political uncertainty strongly influences firm’s cash dividend, and a matured firm tends to pay greater dividends than non-matured firms (firms with more growth options). Thus, this finding suggests that matured firms pay more dividends during period of political uncertainty. Consequently, the study supported the agency theory and the life cycle theory.
Highlights
Researchers around the world have attempted to explore how politics and corporate activities are related
Notes:: dividend yield (DIY)=Dividend yield; political uncertainty (POL)=Political uncertainty; RET= Retained earnings; return on assets (ROA)= Return on assets; LEV= Leverage; SGW= sales growth; block-holders ownership (BLK)=Block holders ownership; FZE= Firm size; board size (BSZ)= Board Size. *** p
Notes: DIY=Dividend yield; POL=Political uncertainty; RET= Retained earnings; ROA= Return on assets; LEV= Leverage; SGW= sales growth; BLK=Block holders ownership; FZE= Firm size; BSZ= Board Size
Summary
Researchers around the world have attempted to explore how politics and corporate activities are related. This study analyses the political influence on a firm’s dividend policy in Nigeria as well as how this relationship prevails in matured firms. Cao, Liljeblom and Weihrich (2017) indicated that policy shocks such as economic and regulatory reforms might affect a firm on the one hand and the benefits of shareholders on the other hand. This political uncertainty leads a firm to reconsider its financial policies, such as a dividend policy as a precautionary measure. This paper contributes to the dividend policy literature in a newly democratised system of government compared to the United States and other countries of the developed world that political uncertainty has greater influence on dividend policy.
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