Dividend Policy Determinants of Firm Value: Empirical Evidence from Listed Non-Financial Companies in Nigeria
- August 18, 2021
- Posted by: rsispostadmin
- Categories: Accounting, IJRISS, Social Science
International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue VII, July 2021 | ISSN 2454–6186
Aroh Nkechi Nympha. Ph.D1, Egolum, Priscilla Uchenna. Ph.D2, Chukwuani Victoria Nnenna.Ph.D3
1Department of Accountancy, Faculty of Management Sciences, Federal Polytechnic Oko, Anambra State, Nigeria.
2Department of Accountancy, Faculty of Management Sciences, Nnamdi Azikiwe University, P. M. B. 5025, Awka, Anambra State, Nigeria.
3Department of Accountancy, Faculty of Management Sciences, Enugu State University, Enugu State Nigeria.
Abstract
The broad objective of this study is to empirically examine dividend policy as determinants of firm value of listed companies in Nigeria by employing apanel data of ten (10) year, from 2010 to 2019 time frame. To achieve this objective, we employed one notable measure of firm value (market to book ratio) and selected specific proxies of dividend policy which have been employed in related prior literature. To this end, we hypothesized that dividend policy measures which include; dividend yield, dividend per share and dividend pay-out ratio are no significant determinants of firm value across listed non-financial firms during the period under investigation in Nigeria. Robust least square regression analysis was employed to test the formulated hypotheses. Results obtained from the descriptive statistics revealed that dividend pay-out is an insignificant determinant of market to book value shown as; DIVPAY (Coef. = -0.0001, t = -0.34 and P -value = 0.737). Again, dividend per share has a significant positive influence on market to shown as; DIPS (Coef. = 0.7692, t = 61.98 and P -value = 0.000). More so, dividend yield has a significant (1%) negative effect on market to book value shown as; DIYD (Coef. = -0.0500, t = -5.63 and P -value = 0.000). From the findings, we conclude that dividend yield and dividend per share are determinants of firm value. However, dividend pay-out ratio is not a significant determinant of firm value in Nigeria. It is recommended that management should concert policies and efforts which will reduce profits share to investors and redirect those funds as retained earnings for the purpose of growing the company.
KEYWORDS: Dividend Payout, Dividend Per Share, Dividend Yield, Firm Value, Non- Financial Companies.
1. INTRODUCTION
It has been well documented that the goal of management is to create value for shareholders; specifically, to maximize shareholder wealth (Lee & Lee, 2019). However, despite extensive theorizing and empirical research, considerable debate exists on whether dividend policy plays a role in achieving this goal. In this regard, Miller and Modigliani (1961) show that in a perfect world dividend policy has no effect on firm value and this has sprung up so much criticisms with the clause that we do not live in a perfect world. According to Egolum and Onyeogubalu (2021), investments in shares earn investment incomes to the investors and by their nature, they are generally very liquid. The investors can easily trade their ownership of stock and reap capital gains in the process. However,
