Abstract
This study examined the factors that determine dividend policy of quoted manufacturing firms in Nigeria. The general purpose is to examine factors that affect dividend policy of the quoted firms. After exhaustive literature review, cross sectional data was sourced from financial statement of twenty quoted manufacturing firms. Dividend payout rate was proxy for dividend policy while growth opportunities, liquidity, management efficiency, profit level, cost of capital, company size and debt equity ratio were proxy for independent variables. The study applied the Pooled Ordinary Least Square (OLS), fixed effect, and random effect regression models using the e-view statistical package. Findings reveal that growth opportunities, profit level, management efficiency and debt equity ratio have negative effect on dividend payout ratio while liquidity, cost of capital and company size have positive effect on dividend payout ratio of the manufacturing firms. We conclude that liquidity cost of capital and company size significantly determine dividend policy while growth opportunities, management efficiency, profit level and debt equity ratio have no significant effect on dividend policy. The study recommends among others, that managers/consultants should carefully examine the economic factors within a firm’s operating environment when carrying out the functions of developing or designing dividend policy for the firm.
Highlights
The primary goal of every corporate organization is to maximize shareholders wealth
Dividend payout rate was proxy for dividend policy while growth opportunities, liquidity, management efficiency, profit level, cost of capital, company size and debt equity ratio were proxy for independent variables
We conclude that liquidity cost of capital and company size significantly determine dividend policy while growth opportunities, management efficiency, profit level and debt equity ratio have no significant effect on dividend policy
Summary
The primary goal of every corporate organization is to maximize shareholders wealth. This motivates management to formulate policies and make decisions that facilitates the achievement of the objectives. In today’s corporate finance, dividend policy addresses other issues such as how firms can attract investors in different tax brackets; how the firm’s market value can be increased by this policy and share repurchases so as to reduce the incidence of paying out cash dividends. Urhoghide and Ojeme (2016) opined that most quoted firms in the Nigerian Stock Exchange have no consistent dividend policy over the past three decades. This observed inconsistency could be attributed to ignorance and or improper understanding of the dynamics in dividend policy administration and this may lead to loss of opportunities to the corporate managers, investors, governments, and the general public. This has kept a lot of investors wondering what really determines when an organization is likely to declare dividend. 1.1 Research Questions This study is provoked by the following questions
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