IDEAS home Printed from https://ideas.repec.org/a/usm/journl/aamjaf01102_103-126.html
   My bibliography  Save this article

Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market

Author

Listed:
  • Rihanat Idowu Abdulkadir

    (Department of Accounting and Finance, University of Ilorin, P.M.B. 1515, Kwara State, Nigeria)

  • Nur Adiana Hiau Abdullah

    (School of Economics, Finance and Banking, College of Business Universiti Utara Malaysia, 06010 UUM Sintok, Kedah, Malaysia)

  • Wong Woei-Chyuan

    () (School of Economics, Finance and Banking, College of Business Universiti Utara Malaysia, 06010 UUM Sintok, Kedah, Malaysia)

Abstract

This paper examines the impact of the global financial crisis on Nigerian listed firms' dividend policies. Our findings indicate that firms adjust their dividend policies in a manner consistent with the need to preserve financial flexibility and mitigate goingconcern risks during the crisis period. Specifically, highly leveraged firms and firms with low cash flows are more likely to omit dividend payments during the crisis. Moreover, the negative effects of foreign ownership on dividend payments during the pre-crisis are muted during the crisis. This suggests that the tax-induced clientele effect became irrelevant as cash dividends became the first order of business for foreign investors during the crisis. In the same vein, prevailing investor demand for cash dividends exerts a positive influence on firms' probability to increase dividends during the crisis, implying that markets attach a high valuation to firms that are able to pay during the crisis period. We also find support for past dividends as a reference point for current dividend decisions in both the crisis and non-crisis periods, although the relation is weakened during the crisis. This implies that some managers strive to maintain stable dividends during the crisis period. Nevertheless, their ability to do so weakens during this period.

Suggested Citation

  • Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Wong Woei-Chyuan, 2015. "Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 103-126.
  • Handle: RePEc:usm:journl:aamjaf01102_103-126
    as

    Download full text from publisher

    File URL: http://web.usm.my/journal/aamjaf/vol%2011-2-2015/aamjaf110215_05.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Eugene F. Fama & Kenneth R. French, 2001. "Disappearing Dividends: Changing Firm Characteristics Or Lower Propensity To Pay?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(1), pages 67-79, March.
    2. Jeon, Jin Q. & Lee, Cheolwoo & Moffett, Clay M., 2011. "Effects of foreign ownership on payout policy: Evidence from the Korean market," Journal of Financial Markets, Elsevier, vol. 14(2), pages 344-375, May.
    3. Kuo, Jing-Ming & Philip, Dennis & Zhang, Qingjing, 2013. "What drives the disappearing dividends phenomenon?," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3499-3514.
    4. Bradford, William & Chen, Chao & Zhu, Song, 2013. "Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 445-464.
    5. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    6. Berna Kirkulak & Guluzar Kurt, 2010. "Are Dividends Disappearing or Shrinking? Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(2), pages 38-52, March.
    7. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    8. Malcolm Baker & Jeffrey Wurgler, 2004. "A Catering Theory of Dividends," Journal of Finance, American Finance Association, vol. 59(3), pages 1125-1165, June.
    9. Li, Wei & Lie, Erik, 2006. "Dividend changes and catering incentives," Journal of Financial Economics, Elsevier, vol. 80(2), pages 293-308, May.
    10. Baker, Malcolm & Wurgler, Jeffrey, 2004. "Appearing and disappearing dividends: The link to catering incentives," Journal of Financial Economics, Elsevier, vol. 73(2), pages 271-288, August.
    11. Mohammed Amidu & Joshua Abor, 2006. "Determinants of dividend payout ratios in Ghana," Journal of Risk Finance, Emerald Group Publishing, vol. 7(2), pages 136-145, March.
    12. Christian Andres & Andre′ Betzer & Inga Bongard & Christian Haesner & Erik Theissen, 2013. "The Information Content of Dividend Surprises: Evidence from Germany," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(5-6), pages 620-645, June.
    13. Chung, Kee H. & Wright, Peter & Charoenwong, Charlie, 1998. "Investment opportunities and market reaction to capital expenditure decisions," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 41-60, January.
    14. Olatundun Adelegan, 2003. "An Empirical Analysis of the Relationship between Cash Flow and Dividend Changes in Nigeria," African Development Review, African Development Bank, vol. 15(1), pages 35-49.
    15. Richard Hauser, 2013. "Did dividend policy change during the financial crisis?," Managerial Finance, Emerald Group Publishing, vol. 39(6), pages 584-606, May.
    16. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-1051, September.
    17. Elton, Edwin J & Gruber, Martin J, 1970. "Marginal Stockholder Tax Rates and the Clientele Effect," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 68-74, February.
    18. Tim Adam & Vidhan K. Goyal, 2008. "The Investment Opportunity Set And Its Proxy Variables," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 31(1), pages 41-63, March.
    19. Sebastian Reddemann & Tobias Basse & Johann-Matthias Graf von der Schulenburg, 2010. "On the Impact of the Financial Crisis on the Dividend Policy of the European Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(1), pages 53-62, January.
    20. Andrew Benito & Garry Young, 2003. "Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 531-555, December.
    21. Michael S. Rozeff, 1982. "Growth, Beta And Agency Costs As Determinants Of Dividend Payout Ratios," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 5(3), pages 249-259, September.
    22. DeAngelo, Harry & DeAngelo, Linda & Stulz, Rene M., 2006. "Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory," Journal of Financial Economics, Elsevier, vol. 81(2), pages 227-254, August.
    23. Kristine Watson Hankins & Mark J. Flannery & M. Nimalendran, 2008. "The Effect of Fiduciary Standards on Institutions' Preference for Dividend‐Paying Stocks," Financial Management, Financial Management Association International, vol. 37(4), pages 647-671, December.
    24. Chai, D.H., 2010. "Foreign Corporate Ownership and Dividends," Working Papers wp401, Centre for Business Research, University of Cambridge.
    25. Yaniv Grinstein & Roni Michaely, 2005. "Institutional Holdings and Payout Policy," Journal of Finance, American Finance Association, vol. 60(3), pages 1389-1426, June.
    26. H. Kent Baker & Samir Saadi & Shantanu Dutta & Devinder Gandhi, 2007. "The perception of dividends by Canadian managers: new survey evidence," International Journal of Managerial Finance, Emerald Group Publishing, vol. 3(1), pages 70-91, January.
    27. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
    28. Kashif Imran, 2011. "Determinants of Dividend Payout Policy: A Case of Pakistan Engineering Sector," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(41), pages 47-60, September.
    29. Ricardo N. Bebczuk, 2004. "Explaining Dividend Policies in Argentina," Department of Economics, Working Papers 050, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    30. DeAngelo, Harry & DeAngelo, Linda, 1990. " Dividend Policy and Financial Distress: An Empirical Investigation of Troubled NYSE Firms," Journal of Finance, American Finance Association, vol. 45(5), pages 1415-1431, December.
    31. Chemmanur, Thomas J. & He, Jie & Hu, Gang & Liu, Helen, 2010. "Is dividend smoothing universal?: New insights from a comparative study of dividend policies in Hong Kong and the U.S," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 413-430, September.
    32. Franck Bancel & Usha R. Mittoo, 2011. "Financial flexibility and the impact of the global financial crisis: Evidence from France," International Journal of Managerial Finance, Emerald Group Publishing, vol. 7(2), pages 179-216, April.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf01102_103-126. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division, Penerbit Universiti Sains Malaysia). General contact details of provider: http://edirc.repec.org/data/aammmea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.