Dividend Policy Determinants in the Nigerian Manufacturing Sector

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DIVIDEND POLICY DETERMINANTS IN THE NIGERIAN MANUFACTURING SECTOR

 

Charles I. Onyeiwu, 1 Bolaji K. Olukomaya2

 

1 Department of Finance, University of Lagos, Akoka, Lagos, Nigeria

2Department of Finance, University of Lagos, Akoka, Lagos, Nigeria

 

E-mail

This email address is being protected from spambots. You need JavaScript enabled to view it. (I.C. Onyeiwu)

This email address is being protected from spambots. You need JavaScript enabled to view it. (B. K. Olukomoya)

 

 

ABSTRACT

 

This study set out to examine the determinants of dividend policy in the Nigeria’s manufacturing sector.  To this end, data from 14 manufacturing firms in the Nigerian capital market were analyzed. A panel regression analysis was utilized to assess the determinants of dividend policy.  The following was found from the panel regression analysis; that there is a negative and insignificant relationship between price earnings multiple and the current dividend payout, that there is a negative and insignificant relationship between leverage ratio and the current dividend payout. Furthermore, there is a positive and insignificant relationship between liquidity ratio and the current dividend payout and that there is a negative and significant relationship between taxation and the current dividend payout. Also, the study found that there is a positive and significant relationship between return on assets (ROA) and the current dividend pay-out. Finally, it was revealed that there is a significant positive relationship between firm size (SIZE) and the current dividend pay-out. Given these breakdowns, it means that there are three main determinants of dividend policy in the Nigerian capital market namely, the tax rate, the return on equity and the size of the firm. The policy implication of this is that manufacturing companies should focus on proper tax planning, adequate return on investment and proper liquidity and assets management if it considers dividend policy to be relevant according to the dividend relevancy school of thought.

 

Keywords: Payout ratio, Determinants, Return on assets, Tax rate, Liquidity ratio

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