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Modelling Dividend Policy and Firms' Value Relations in Nigeria

Author

Listed:
  • Chukwu Agwu Ejem

    (Department of Banking and Finance, Abia State University, Uturu, Nigeria,)

  • Udochukwu Godfrey Ogbonna

    (Department of Banking and Finance, Rhema University, Aba, Nigeria.)

Abstract

This study investigated the controversy raging between dividend policy and firms' value in Nigeria. This study made use of 24 quoted companies selected from 10 sectors of Nigerian economy from firm's annual reports and accounts for the period of 2012-2017. The results of the descriptive statistics found that few numbers of companies are paying high dividends, while the rest companies are paying very low or no dividends. The correlation test revealed that leverage firms are likely to pay lower dividends in Nigeria. Also, found absence of multicollinearity among the variables. The researchers fitted the three conventional models of panel data analysis and found earnings exerting positive and significant influence on the firms' value, whereas dividend per share insignificantly impacts firms' value. Likelihood ratio and Hausman tests rejected the null hypothesis that unobserved variables have no significant relationship with observed variables. The two tests back fixed effect that unobserved variables are important explanatory variable for firm's value. Therefore, the researchers are suggesting that firms improve on their operations by managing the resources of their firms effectively and efficiently in order to increase earnings.

Suggested Citation

  • Chukwu Agwu Ejem & Udochukwu Godfrey Ogbonna, 2019. "Modelling Dividend Policy and Firms' Value Relations in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 171-176.
    • Handle: RePEc:eco:journ1:2019-06-21
    as

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    References listed on IDEAS

    as
    1. Akram Budagaga, 2017. "Dividend Payment and its Impact on the Value of Firms Listed on Istanbul Stock Exchange: A Residual Income Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 370-376.
    2. M. J. Gordon, 1963. "Optimal Investment And Financing Policy," Journal of Finance, American Finance Association, vol. 18(2), pages 264-272, May.
    3. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    4. Pandey I M, 1988. "Financial Management Research in India," IIMA Working Papers WP1988-02-01_00807, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. James E. Walter, 1963. "Dividend Policy: Its Influence On The Value Of The Enterprise," Journal of Finance, American Finance Association, vol. 18(2), pages 280-291, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dividend policy; Firm's value; Earnings; Dividend per share; fixed effects.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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