The Impact of Dividend Policy on Stock Prices in Money Deposit Banks in Nigeria (1994-2019)

International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue XI, November 2021 | ISSN 2321–2705

The Impact of Dividend Policy on Stock Prices in Money Deposit Banks in Nigeria (1994-2019)

ALASHE, Abdulganiyy Kayode¹, ISHOLA, Joseph Olaniyi^2
1Department of Accountancy, School of Management and Business Studies, Lagos State Polytechnic, Ikorodu, Nigeria
²Department of Accountancy, School of Part Time Studies, Lagos State Polytechnic, Ikorodu, Nigeria

Abstract: The tenacity of this study was to study the empirical influence of dividend policy on stock prices in Nigerian deposit banks. This study, which required the acquisition of historical data, used post-facto research. The population of the study was the twenty-two (22) money deposit banks in Nigeria. Secondary data through annual reports (1994-2019) for a period of 25 years was obtained from the selected banks. The Statistical Package for the Social Sciences software were used to describe observations through descriptive statistics, such as minimum, maximum, means and standard deviation, while the relationship between stock price and dividend policy was investigated through the use of inferential statistics such as regression analysis and correlation technics. The statistics showed a favorable and substantial influence on the stock price of a dividend per share (DPS) (= 0.1971; p 0.05). Earnings per share (EPS) were considerably beneficial to the share price (=0.0404; p0.05), however a lower positive influence was shown in the payout ratio (DPR) (=0.9227; p>0.05). During the study period, dividend policy had an influence on the stock prices of Nigerian deposit money institutions, according to the findings. The study therefore recommended that companies should strive for strong adherence to shareholders’ interests in adopting dividend policies that maximize shareholder value by management, among other things.

Keywords: Dividend, dividend policy, earnings per share, dividend per share, dividend payout ratio

I. INTRODUCTION

The dividend decision is one of three fundamental decisions that a financial manager must make, the other two being investment and financing decisions (Muhammad, 2016). The board of directors recommends the dividend decision at the annual general meeting (Akinwunmi & Akinola, 2019). The board of directors is faced with the challenge of balancing the requirement to finance future expansion with the need to retain appropriate liquidity and satisfy shareholder expectations. As a result, decisions on the extent of profit retention, cash or stock dividend, buyback of market shares, and the amount and timing of dividends must be taken (Al-Masum, 2014). As a result, while determining an appropriate dividend policy, managers examine not only the current year’s profit but also predicted future earnings and the company’s ability to maintain a stable dividend rate while taking systematic growth into account (Amuche, 2014; Ashamu, Abiola & Badmus, 2010).

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