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Dividend Payment Behaviour and its Determinants: The Nigerian Evidence

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  • Rihanat Idowu Abdulkadir
  • Nur Adiana Hiau Abdullah
  • Woei-Chyuan Wong

Abstract

type="main" xml:lang="en"> This paper offers new evidence on the existence of disappearing dividend phenomenon in the Nigerian stock market and as to how clientele, catering and life-cycle theories of dividend affect firms' dividend paying behaviour. We did not find conclusive evidence to suggest that dividend payments had become second order of importance in firms' payout policies during 2003–2012 because we only observed a downward trend in dividend payments during 2010–2012. Logistic regression of a probability to pay or not to pay dividend and a panel regression of the size of dividend payment show that clientele theory stands out as compared to catering and life-cycle theories. Firms in our sample shape their dividend policies in line with the preference of foreign investors who have less preference for dividend over capital gain due to dividend taxes imposed on these shareholders. This underlines the importance of foreign investors on firms' corporate decisions given the fact they owned more than half of the total shares traded on the Nigerian Stock Exchange. Other determinants that affect the propensity to pay are profitability, investment opportunities, leverage, cash flow, crisis, stock market performance, past dividend and interest rate with signs that are consistent with the prediction of traditional dividend theories.

Suggested Citation

  • Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Woei-Chyuan Wong, 2016. "Dividend Payment Behaviour and its Determinants: The Nigerian Evidence," African Development Review, African Development Bank, vol. 28(1), pages 53-63, March.
    • Handle: RePEc:bla:afrdev:v:28:y:2016:i:1:p:53-63
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    Cited by:

    1. Karamat A., Kelani, & Oluwafunmilayo T. , Adekola & Mohammed S., Yusuf, & A., Abdulhameed, & A. H., Mohammed,, 2021. "Perceived Knowledge And Attitudes Of Socialworkers Towards The Elderly In Ilorin, Kwara State, Nigeria," Ilorin Journal of Business and Social Sciences, Faculty of Social Sciences, University of Ilorin, vol. 23(1), pages 173-186, February.
    2. Seyed Alireza Athari, 2022. "Does investor protection affect corporate dividend policy? Evidence from Asian markets," Bulletin of Economic Research, Wiley Blackwell, vol. 74(2), pages 579-598, April.
    3. Seyed Alireza Athari, 2021. "The effects of institutional settings and risks on bank dividend policy in an emerging market: Evidence from Tobit model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4493-4515, July.
    4. Anshu Agrawal, 2021. "Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions," JRFM, MDPI, vol. 14(9), pages 1-38, September.
    5. Samson Adewumi, 2020. "Life after Retirement and Struggle for Pension in Osun State, Nigeria," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(3), pages 140-153.
    6. Mousa Sharaf Adin Hezam Saleh & Yusnidah Ibrahim & Hanita Kadir Shahar, 2020. "The Simultaneous Effect of Corporate Ownership on Dividends and Capital Structure: Malaysian Evidence," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(6), pages 46-62, December.
    7. Muhammad Nadeem Khan & Moona Shamim, 2017. "A Sectoral Analysis of Dividend Payment Behavior," SAGE Open, , vol. 7(1), pages 21582440166, January.
    8. Joanna Próchniak & Renata Płoska & Anna Zamojska & Błażej Lepczyński & Giuseppe T. Cirella, 2023. "Maturity Analysis of Stock Exchanges in Africa: Prepandemic Sustainability Perspective," Sustainability, MDPI, vol. 15(8), pages 1-18, April.
    9. ElBannan, Mona A., 2020. "Does catering behavior persist? Evidence on dividend sentiment in emerging financial markets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 350-373.
    10. Farooq, Omar & Ahmed, Neveen, 2019. "Dividend policy and political uncertainty: Evidence from the US presidential elections," Research in International Business and Finance, Elsevier, vol. 48(C), pages 201-209.

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