Payout Policy, Agency Conflict and Corporate Governance in Nigeria

Abstract

This paper investigates payout policy, agency conflicts and corporate governance in Nigeria. Using a sample of thirty (30) listed companies randomly selected in the Nigerian Stock Exchange for the period 2006-2010, the panel OLS regression results indicate that firms’ investment opportunities and leverage have significant impact on the dividend payout.The corporate governance mechanisms comprising the CEO shareholdings, directors’ shareholdings and the institutional ownership have positive but non-significant impact on the dividend payout.This means that the insiders and institutional ownership may not complete mitigate the agency conflicts associated with effective dividend payout policy. Moreover, the negative and non-significant association of cash-flow and growth of firms may indicate more retentions by directors which may be expropriated by firm’s management through salaries and other compensations or invested in projects to satisfy personal benefits at the dispense of the shareholders. Therefore, a strong corporate governance mechanism comprising more non-executive directors and institutional ownership is recommended to mitigate the agency conflicts and improve the dividend payout