International Journal of Research and Innovation in Social Science (IJRISS) |Volume VI, Issue XII, December 2022|ISSN 2454-6186

Corporate Leverage Management and Dividend Policy of Firms in the Consumer Goods Industries in Nigeria

Ani, Thomas Maduabuchi¹*, Inyiama, Oliver Ikechukwu², and Nnamani, Emeka Ogbonna^3
1,²Department of Accountancy, Enugu State University of Science and Technology, Enugu State, Nigeria
³Department of business Administration, Enugu State University of Science and Technology, Enugu State, Nigeria
*Correspondence author

Abstract: The study was designed to examine the effect of corporate leverage management on dividend policy of firms in the consumer goods industries in Nigeria. This study adopted ex-post facto research design. It uses annual time series data extracted from the Annual Report and Accounts of consumer goods companies under study. The data covered from 2006 -2020. For the data analysis, the study uses descriptive statistics as well as statistical correlations and regression analysis where dividend policy as the dependent variable, long term debt to total asset, Debt to equity ratio and debt to capital ratio as independent variables. The result therefore, revealed there is positive but weak (r = 0.201919) relationship between long term debt to total asset and dividend policy for the year. Another one revealed that the Debt equity ratio on dividend policy in Nigeria has negative (-0.0556) but significant (p>0.015) contribution on dividend policy for the year well Debt capital ratio on dividend policy in Nigeria has negative (-7.987574) but significant (p>0.0103) contribution on dividend policy for the year. It implies that organisations that have a higher level of leverage are face more insecurity and may suffer bankruptcy and cannot pay dividend to investors as supposed. The study recommends that Consumer goods organization management should keep away from depending long term liability in financing its activities to avoid low asset turnover. Secondly, Management of consumer goods companies should consider sinking fund account necessary to provide for the repayment of their debt before the maturity period. Finally, Consumer goods organization management should ensure that leftover debt capital is immediately paid off.

Keywords: corporate leverage, dividend policy, debt, total asset, equity ratio

I. INTRODUCTION

1.1 Background to the study

Nigerian consumer goods firms are important sectors that contribute and thriving positively to the nation’s economy by creating employment and companies’ growth. They also produce home accessories, beverages, and drinks for entertainment and social well being of the Nigerian communities. Their activities catch the interest of both foreign and domestic investors. They also contribute to the growth of Nigeria economy. Therefore, it becomes imperative to know how this sector finances its operation as well as what it is paying back to its equity investors in the form of dividend.

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