Micro Determinants of Dividend Policy in Quoted Manufacturing Companies in Nigeria
Keywords:
Dividend Policy, Quoted Manufacturing Companies, Dividend payout ratio, Management efficiency
Abstract
This study examined the factors that determine dividend policy of quoted manufacturing firms in Nigeria. The general purpose is to examine factors that affect dividend policy of the quoted firms. After exhaustive literature review, cross sectional data was sourced from financial statement of twenty quoted manufacturing firms. Dividend payout rate was proxy for dividend policy while growth opportunities, liquidity, management efficiency, profit level, cost of capital, company size and debt equity ratio were proxy for independent variables. The study applied the Pooled Ordinary Least Square (OLS), fixed effect, and random effect regression models using the e-view statistical package. Findings reveal that growth opportunities, profit level, management efficiency and debt equity ratio have negative effect on dividend payout ratio while liquidity, cost of capital and company size have positive effect on dividend payout ratio of the manufacturing firms. We conclude that liquidity cost of capital and company size significantly determine dividend policy while growth opportunities, management efficiency, profit level and debt equity ratio have no significant effect on dividend policy. The study recommends among others, that managers/consultants should carefully examine the economic factors within a firm’s operating environment when carrying out the functions of developing or designing dividend policy for the firm.
References
Abubakar, N. (2011). The Determinants of Dividend Payout in the Nigeria Banking Industry. A thesis Submitted to the post- graduate School. Ahmadu Bello University, Zaria.
Agbadudu, A. B. (2009).Basic Statistics for Management Sciences and Practitioners; Benin, A. B. Mudiaga Limited
Ahmed, M. M., Imran, H., & Ali, I. (2014). Determinants of Dividend Policy: An Empirical Study of Banking Sector of Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 5(11), 360-369.
Aivazian, V., Booth, L., & Cleary, S. (2003). Do Emerging Market Firms Follow Different Dividend Policies from US firms? Journal of Financial Research, 26(3), 371–387.
Amidu, M., &Abor, J.,(2006). Determinants of Dividend Payout Ratios in Ghana. The Journal of Risk Finance, 7(2), 135-145.
Anil K, &kapoor S., (2008). Determinants of Dividend Payout Ratios - A study of Indian Information Technology Sector. International Resource Journal of Finance and Economics, 1(5),1-9.
Anyamaobi, C., & Lucky, A. L., (2017). Corporate Characteristics and Value Creation: A Panel Data Evidence of Nigeria Quoted Manufacturing Firms. World Journal of Finance and Investment Research, 2(1), 31-49.
Bahaa, A. (2015). Determinants of Dividend Policy in Kuwait Stock Exchange. International Journal of Business and Management Review, 7 (3), 72-78.
Bahrar, R., &Makiaris A.G (2011). Dividend, Momentum and Macroeconomic Variables as Determinants of US Equity Premium across Economic Regimes. Review of Behavioural Finance, 3 (5), 27 – 53.
Baker, H. K., & Powell, G. (2000). Determinants of corporate dividend policy: A survey of NYSE firms. decisions of major US firms. Financial Review, 26(33), 409–430.
Bartlomej, J., Jack, K., (2015). Microeconomic and Macroeconomic Determinants of the Dividend Policy in Companies Quoted at Warsaw Stock Exchange. Research Results. Ekonomiaiprawo 14 (4), 443 – 457.
Basse, T., &Reddemann, S. (2011). Inflation and the dividend policy of US firms. Economics Watch, 6 (4) 333-64
Blake Taylor (2005). An Empirical Evaluation of the Capital Asset Pricing Model. Economics Review 18: 373-399.
Brealey& Meyers (2003), Principles of Corporate Finance, 7th ed., the McGraw−Hill Companies. 5(12), 136-144.
Brigham & Houston 2004, Fundamental of financial management, 10th ed., McGraw-Hill
Brigham, E, F., &Daves, P. R. (2010). Intermediate financial management (10th ed.). Nature Boulevard: Cengage learning.
Brigham, F & J, Gordon (1968).Leverage, Dividend Policy, and the Cost of Capital. Journal of financial economies, 23(9),152-179.
Dada, F.B., (2015). Critical Evaluation of Dividend Policy of Banking Sector in Nigeria. International Journal of Economics, Commerce and Management, 3(2), 1-11. Eugene, F., and Kenneth, R. F., (2004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives. 18(3), 25. 3- 43.
Easterbrook, F. H. (1984). Two agency-cost explanations on dividends. American Economic Review, 74, 650–659.
Eugene, F., and Kenneth, R. F., (2004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives. 18(3), 25. 3- 43.
Fama, E, & French, K .,(1992) The Cross-section of Expected Stock Returns. Journal of Finance. 47(2),427-465.
Fama, E., & French, K. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay. Journal of Financial Economics, 60, 3–43.
Ferris, S., Jagannathan, M., & Pritchard, A. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. Journal of Finance, 58, 1087–1111
Gordon, M. J. & Shapiro E. (1956), Capital Equipment Analysis: The Required Rate of Profit, Management Science, 3 (1) 102-110.
Gujarati, N 2004, Basic Econometrics, McGraw-Hill Book Company, Singapore.
Hussainey, K., Mgbame. C.O., &Mgbame, A. M.C. (2011). Dividend policy and share price volatility: UK evidence. The Journal of risk Finance, 12, (1), 57-68.
Iheduru, N. G. (2011), Qualitative Techniques for Business Decision Making; Owerri, Alphabet Nigeria Publishers.
Jensen, G., Solberg, D., & Zorn, T. (1992). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of Financial and Quantitative Analysis, 27, 247–263
Jensen, M.C., and Meckling, W.H., (1976). Theory of the Firm: Managerial Behaviour Agency Costs and Ownership Structure. Journal of Financial Economics, 3,305-306.
Kinfe, T. (2011). Determinants of Dividend Payout: An Empirical Study on Bank Industry in Ethopia. A thesis submitted to the school of Gradual Studies Addis- Ababa University Ethopia.
King'wara, R. (2015). Determinants of Dividend Payout Ratios in Kenya. Research Journal of Finance and Accounting, 6 (1), 45-78
Lintner, J. (1956); Distribution of Income of Corporation Among Dividends, Retained Earnings and Taxes. Journal of American Economics Review, 46, (2), 97-113.
Liu, S. and Hu, Y. (2005).Empirical analysis of cash dividend payment in Chinese Listed companies, Nature and Science, 3 (1),145-167.
Maniagi, G; Ondiek, B; Musiega, D; Maokomba, O; & Egessa, R. (2013). Determinants of Dividend Payout among Non-Financial Firms on Nairobi Securities Exchange, Kenya. International Journal of Science and Technology Research, 2 (10), 253-266.
Manigagi, G. M; & El Khoury, R. (2014); Determinants of Dividend Policy. International Journal of Economics and Finance, 6 (4), 240-256.
Miller, M. H., & Modigliani, F. (1961). Dividend policy growth and the valuation of shares. The Journal of Business, 34, (4), 411-433.
Mohammed N, H. W. (2006). Empirical analysis of determinant of dividend payment, profitability and liquidity. Accounting research institute and faculty of accounting, Malaysia, 2(1),12-35.
Ndungu, A. (2009). Determinants of dividend policy: Evidence from the Nairobi Stock Exchange, Unpublished MBA Project, University of Nairobi
Ochieng, D. E., &Kinyua, W. H., (2013). Relationship between Inflation and Dividend Payout for Companies Listed At the Nairobi Securities Exchange. International Journal of Education and Research 1 (6), 78 - 102.
Okpara, G. C. (2010). A diagnosis of the determinant of dividend pay-out policy in Nigeria: A factor analytical approach. American Journal of Scientific Research, 8, 57–67.
Oyinlola, O.M., Oyinlola, F.O., &Adeniran, J.O., (2014). The influence of Dividend Payout in the Performance of Nigerian Listed Brewery Companies. International Journal of Economics and Management Science, 3(1), 13-21.
Pandey, I.M (2005), Financial management (9th Ed.).Delhi: Vikas Publishing House Pvt Ltd.
Rozeff, M. S. (1992). How companies set their dividend-payout ratios. The Revolution in Corporate Finance, Oxford: Blackwell Publishers.
Shapiro, Alan C, (1990),’Modern Corporate Finance. New York’ Macmillan Publishing Co.
Sifunjo K. (1999). The causal relationship between exchange rates and dividend policy in Kenya, Unpublished MBA Project, University of Nairobi.
Urhoghide, R. O and Ojeme, S. S. (2016), Determinants of Dividend Payout by Nigerian Quoted Banks. ICAN Journal of Accounting & Finance, Vol. 5 No. 1.
Uwuigbe, O.R., (2013). Determinants of Dividend Policy: A Study of Selected Listed Firms in Nigeria. Manager, 1(7),107-119.
Van Horne, J. C. &Wachowicz, J. M. Jr. (2001); Fundamentals of Financial Management, 11th Edition. New York: Prentice Hall.
Watson, D. and Head, A. (2004); Corporate Finance: Principles & Practice (3rdEd.) Essex:
Agbadudu, A. B. (2009).Basic Statistics for Management Sciences and Practitioners; Benin, A. B. Mudiaga Limited
Ahmed, M. M., Imran, H., & Ali, I. (2014). Determinants of Dividend Policy: An Empirical Study of Banking Sector of Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 5(11), 360-369.
Aivazian, V., Booth, L., & Cleary, S. (2003). Do Emerging Market Firms Follow Different Dividend Policies from US firms? Journal of Financial Research, 26(3), 371–387.
Amidu, M., &Abor, J.,(2006). Determinants of Dividend Payout Ratios in Ghana. The Journal of Risk Finance, 7(2), 135-145.
Anil K, &kapoor S., (2008). Determinants of Dividend Payout Ratios - A study of Indian Information Technology Sector. International Resource Journal of Finance and Economics, 1(5),1-9.
Anyamaobi, C., & Lucky, A. L., (2017). Corporate Characteristics and Value Creation: A Panel Data Evidence of Nigeria Quoted Manufacturing Firms. World Journal of Finance and Investment Research, 2(1), 31-49.
Bahaa, A. (2015). Determinants of Dividend Policy in Kuwait Stock Exchange. International Journal of Business and Management Review, 7 (3), 72-78.
Bahrar, R., &Makiaris A.G (2011). Dividend, Momentum and Macroeconomic Variables as Determinants of US Equity Premium across Economic Regimes. Review of Behavioural Finance, 3 (5), 27 – 53.
Baker, H. K., & Powell, G. (2000). Determinants of corporate dividend policy: A survey of NYSE firms. decisions of major US firms. Financial Review, 26(33), 409–430.
Bartlomej, J., Jack, K., (2015). Microeconomic and Macroeconomic Determinants of the Dividend Policy in Companies Quoted at Warsaw Stock Exchange. Research Results. Ekonomiaiprawo 14 (4), 443 – 457.
Basse, T., &Reddemann, S. (2011). Inflation and the dividend policy of US firms. Economics Watch, 6 (4) 333-64
Blake Taylor (2005). An Empirical Evaluation of the Capital Asset Pricing Model. Economics Review 18: 373-399.
Brealey& Meyers (2003), Principles of Corporate Finance, 7th ed., the McGraw−Hill Companies. 5(12), 136-144.
Brigham & Houston 2004, Fundamental of financial management, 10th ed., McGraw-Hill
Brigham, E, F., &Daves, P. R. (2010). Intermediate financial management (10th ed.). Nature Boulevard: Cengage learning.
Brigham, F & J, Gordon (1968).Leverage, Dividend Policy, and the Cost of Capital. Journal of financial economies, 23(9),152-179.
Dada, F.B., (2015). Critical Evaluation of Dividend Policy of Banking Sector in Nigeria. International Journal of Economics, Commerce and Management, 3(2), 1-11. Eugene, F., and Kenneth, R. F., (2004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives. 18(3), 25. 3- 43.
Easterbrook, F. H. (1984). Two agency-cost explanations on dividends. American Economic Review, 74, 650–659.
Eugene, F., and Kenneth, R. F., (2004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives. 18(3), 25. 3- 43.
Fama, E, & French, K .,(1992) The Cross-section of Expected Stock Returns. Journal of Finance. 47(2),427-465.
Fama, E., & French, K. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay. Journal of Financial Economics, 60, 3–43.
Ferris, S., Jagannathan, M., & Pritchard, A. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. Journal of Finance, 58, 1087–1111
Gordon, M. J. & Shapiro E. (1956), Capital Equipment Analysis: The Required Rate of Profit, Management Science, 3 (1) 102-110.
Gujarati, N 2004, Basic Econometrics, McGraw-Hill Book Company, Singapore.
Hussainey, K., Mgbame. C.O., &Mgbame, A. M.C. (2011). Dividend policy and share price volatility: UK evidence. The Journal of risk Finance, 12, (1), 57-68.
Iheduru, N. G. (2011), Qualitative Techniques for Business Decision Making; Owerri, Alphabet Nigeria Publishers.
Jensen, G., Solberg, D., & Zorn, T. (1992). Simultaneous determination of insider ownership, debt, and dividend policies. Journal of Financial and Quantitative Analysis, 27, 247–263
Jensen, M.C., and Meckling, W.H., (1976). Theory of the Firm: Managerial Behaviour Agency Costs and Ownership Structure. Journal of Financial Economics, 3,305-306.
Kinfe, T. (2011). Determinants of Dividend Payout: An Empirical Study on Bank Industry in Ethopia. A thesis submitted to the school of Gradual Studies Addis- Ababa University Ethopia.
King'wara, R. (2015). Determinants of Dividend Payout Ratios in Kenya. Research Journal of Finance and Accounting, 6 (1), 45-78
Lintner, J. (1956); Distribution of Income of Corporation Among Dividends, Retained Earnings and Taxes. Journal of American Economics Review, 46, (2), 97-113.
Liu, S. and Hu, Y. (2005).Empirical analysis of cash dividend payment in Chinese Listed companies, Nature and Science, 3 (1),145-167.
Maniagi, G; Ondiek, B; Musiega, D; Maokomba, O; & Egessa, R. (2013). Determinants of Dividend Payout among Non-Financial Firms on Nairobi Securities Exchange, Kenya. International Journal of Science and Technology Research, 2 (10), 253-266.
Manigagi, G. M; & El Khoury, R. (2014); Determinants of Dividend Policy. International Journal of Economics and Finance, 6 (4), 240-256.
Miller, M. H., & Modigliani, F. (1961). Dividend policy growth and the valuation of shares. The Journal of Business, 34, (4), 411-433.
Mohammed N, H. W. (2006). Empirical analysis of determinant of dividend payment, profitability and liquidity. Accounting research institute and faculty of accounting, Malaysia, 2(1),12-35.
Ndungu, A. (2009). Determinants of dividend policy: Evidence from the Nairobi Stock Exchange, Unpublished MBA Project, University of Nairobi
Ochieng, D. E., &Kinyua, W. H., (2013). Relationship between Inflation and Dividend Payout for Companies Listed At the Nairobi Securities Exchange. International Journal of Education and Research 1 (6), 78 - 102.
Okpara, G. C. (2010). A diagnosis of the determinant of dividend pay-out policy in Nigeria: A factor analytical approach. American Journal of Scientific Research, 8, 57–67.
Oyinlola, O.M., Oyinlola, F.O., &Adeniran, J.O., (2014). The influence of Dividend Payout in the Performance of Nigerian Listed Brewery Companies. International Journal of Economics and Management Science, 3(1), 13-21.
Pandey, I.M (2005), Financial management (9th Ed.).Delhi: Vikas Publishing House Pvt Ltd.
Rozeff, M. S. (1992). How companies set their dividend-payout ratios. The Revolution in Corporate Finance, Oxford: Blackwell Publishers.
Shapiro, Alan C, (1990),’Modern Corporate Finance. New York’ Macmillan Publishing Co.
Sifunjo K. (1999). The causal relationship between exchange rates and dividend policy in Kenya, Unpublished MBA Project, University of Nairobi.
Urhoghide, R. O and Ojeme, S. S. (2016), Determinants of Dividend Payout by Nigerian Quoted Banks. ICAN Journal of Accounting & Finance, Vol. 5 No. 1.
Uwuigbe, O.R., (2013). Determinants of Dividend Policy: A Study of Selected Listed Firms in Nigeria. Manager, 1(7),107-119.
Van Horne, J. C. &Wachowicz, J. M. Jr. (2001); Fundamentals of Financial Management, 11th Edition. New York: Prentice Hall.
Watson, D. and Head, A. (2004); Corporate Finance: Principles & Practice (3rdEd.) Essex:
Published
2018-11-07
How to Cite
Iheduru, N. G., & Okoro, C. U. (2018). Micro Determinants of Dividend Policy in Quoted Manufacturing Companies in Nigeria. Australian Finance & Banking Review, 2(2), 7-21. https://doi.org/10.46281/afbr.v2i2.193
Issue
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2018 Ngozi G. Iheduru, Charles U. Okoro
This work is licensed under a Creative Commons Attribution 4.0 International License.
Australian Finance & Banking Society is licensed under a 