The dividend policy of firms quoted on the Nigerian stock exchange: An empirical analysis

Abstract

This paper utilizes the parsimonious multiple regression model developed by Musa (2005) to investigate the dividend policy of a cross-section of 53 firms quoted on the Nigerian Stock Exchange (NSE) during the period 1993 to 2002. The model employs five metric variables-previous dividend, current earnings, cash flow, investment and net current assets, and three non-metric variables- growth, firm size and industry classification, in order to explain as well as predict the dividend policy of quoted firms in Nigeria. The empirical results reveal that the five metric variables have significant aggregate impact on the dividend policy of the quoted firms. However, three of the variables- current earnings (E), previous dividend [DIVi (t-1)] and cash flow (CF), have been found to be robust in the model. Finally, the tests find that none of the three non-metric variables provides a statistically significant improvement to the base model. Key words: Dividend policy, Nigerian stock exchange, survivorship bias.