An empirical study of dividend policy of quoted companies in Nigeria

Abstract

This study attempt to evaluate the observed dividend policy of a cross section of 27 Nigeria quoted companies using theories tested to explain dividend behavior of those firms. These theories which are several and varied; even contradict each other and considerable doubt exist as to which theory best represent the observed dividend behaviour of Nigerian firms; hence the need for this study. To carry out this study a more recent data for the period (1996 – 2006) were reviewed and a model with the necessary policy variables constructed. Factor upon which dividend decisions are based are identified and the magnitude of their effect estimated. Our estimation reveals that the traditional factors are significant in explaining and predicting their dividend decision within the period under review. The result provides strong support for the
explanatory or predictive power of Lintner’s model. Also, factors which attempt to explain variations in share market prices were identified, and the magnitude of their effect estimated. The result confirms that share
market price is a representation of market valuation of dividends.