Dividend Policy and the Performance of Firms Listed on the Nigerian Stock Exchange

Abstract

This study sought to assess the significance of dividend policy and suggest measures that could enhance its effectiveness on firms’ performance in Nigeria. To achieve the objective, some financial and performance indicators were evaluated. The ex-post facto research design was adopted and the data were collated, analyzed and tested using the descriptive statistics and the panel data analysis techniques. Analysis revealed that without the moderating variable (corporate governance index), dividend payout ratio was statistically insignificant both in the short run and long run periods. This implies that without the moderating variable, the relationship between dividend payout ratio and firm performance is a matter of chance. While, with the moderating effect, dividend payout ratio became statistically significant in the short run as well as in the long run indicating that existence of a relationship between dividend payout and firm performance is not caused by chance. Also, without the moderating variable, dividend per share was statistically insignificant in both the short and long run periods. The investigation concluded that amongst the various dividend policy options considered, dividend payout ratio is the most critical dividend policy measure that determines the performance of a firm both in the short and long run periods. The study recommended among others that listed firms that are willing to maximize shareholders wealth and firms value should consistently increase their dividend payout ratio as this signals that the firm is financially healthy.