| Peer-Reviewed

Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria

Received: 26 December 2019     Accepted: 8 January 2020     Published: 31 January 2020
Views:       Downloads:
Abstract

The study empirically analyzed the relationship between dividend policy and firm’s financial characteristics with a particular focus to consumer goods manufacturing companies in Nigeria. It utilized annual time series secondary data obtained from annual report and financial statements of the selected firms for the period of ten (10) years (2009-2018). Dividend policy was operationalized by Dividend per Share (DPS) and Dividend Payout Ratio (DPR) while the financial characteristics considered were Return on Assets (ROA), Return on Equity (ROE), and Earnings per Share (EPS). Ex-post facto research design was adopted while analytical techniques employed were Pearson Product Moment Correlation (PPMC) and Pairwise Granger Causality analysis mechanism. Findings revealed that Dividend per Share (DPS) interacts positively with the selected firm’s financial characteristics while there is a negative and insignificant relationship between Return on Assets (ROA), Return on Equity (ROE), and Dividend Payout Ratio (DPR) of the selected firms. A positive relationship was maintained between DPR and EPS for the period. Meanwhile, the link between ROA and DPS was significant at 5% level. More so, evidence from the pairwise granger causality test revealed that there is no directional relationship between dividend policy and financial performance of consumer goods manufacturing firms in Nigeria. On this background, the study suggested that the financial system be reformed to enhance the operational efficiency of the financial market so as to determine the profitability of quoted firms via the dividend policy channel. It was also recommended that Managers of consumer goods manufacturing firms in Nigeria should ensure that they have well-structured dividend policies in place as this will make the company shares attractive to investors and however lead to increased stock prices and enhanced profitability.

Published in Science Journal of Business and Management (Volume 8, Issue 1)
DOI 10.11648/j.sjbm.20200801.12
Page(s) 7-15
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Dividend Policy, Profitability, Pearson Correlation, Pairwise Granger Causality, Manufacturing Firm

References
[1] Amidu, M. (2007). How does dividend policy affect the performance of firms in Ghana stock exchange? Journal of Investment Management and Financial Innovations, 4 (2), 6-8.
[2] Ezirim, B. C. (2005). Finance Dynamics: Principle, Techniques and Application. Markowitz Centre for Research and Development.
[3] Anike, E. A. (2014). The impact of dividend policy and earnings on stock prices of Nigeria banks. Department of Banking and Finance, Faculty of Business Administration, University of Nigeria, Nsukka, Enugu State.
[4] Khan, M. N., Nadeem, B., Islam, F., Salman, M. & Gill, H. M. I. S. (2016). Impact of dividend policy on firm performance: Empirical evidence from Pakistan stock exchange. American Journal of Economics, Finance and Management, 2 (4), 28-34.
[5] Olabisi, J., Faberu, O. & Onyekuwuluje, T. P. (2017). Determinants of dividend policy among Nigerian listed consumer goods manufacturing companies. Journal of Humanities, Social Sciences and Crative Arts, 92-104.
[6] Bartram, S. M. et al. (2009). Agency Conflicts and Corporate Payout Policies: A Global Study
[7] Jensen, M. C. & Meckling, W. H. (1976). Theory of dividend policy in Jordan: An application of the firm: Managerial behaviour, agency costs and Tobit model. Journal of Economic & Administrative ownership structure, 30 (4).
[8] DeAngelo, H., De Angelo, L., & Stulz, R. (2006). Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory. Journal of Financial Economics, 81, 227-254.
[9] Akani, H. W. & Sweneme, Y. (2016). Dividend policy and the profitability of selected quoted manufacturing firms in Nigeria: An empirical analysis. Journal of Finance and Accounting, 4 (4), 212-224.
[10] Olarewaju, O. M., Migiro, S. O. & Sibanda, M. (2018). Dividend payout, retention policy and financial performance in commercial banks: any causal relationship? Studia Universitatis Babeș-Bolyai Oeconomica, 63 (1), 37-62.
[11] Agilebu, O. M. (2019). Dividend decision and economic value added of quoted Nigeria manufacturing firms. American Economic & Social Review, 5 (2), 45-59.
[12] Ubaka, I. E. (2017). Corporate dividend policy and firm performance: Nigeria evidence from quoted conglomerate firms. 2017 National Conference of School of Management Studies, Ilaro, Ogun State, 1-19.
[13] Uwuigbe, U., Jafaru, J. & Ajayi, A. (2012). Dividend policy and firm performance: A study of listed firms in Nigeria. Accounting and Management Information Systems, 11 (3), 442-454.
[14] Okafor, I. G., Ugwuegbe, Ugochukwu, S. & Ezeaku, H. C. (2016). The effect of board interest on dividend policy of Nigerian manufacturing sector. International Journal of Academic Research in Business and Social Sciences, 6 (8), 100-115.
[15] Muhammad, T. & Muhammad, M. (2016). Determinants of dividend payout: Evidence from listed Oil and Gas Companies of Pakistan. The Journal of Asian Finance, Economics and Business, 3 (4), 25-37.
[16] Adesina, K., Uwuigbe, U., Uwuigbe, O. R., Asiriuwa, O. & Oriabe, S. (2017). Dividend policy and share price valuation in the Nigerian banks. EuroEconomica, 36 (1).
[17] Odum, A. N., Odum, C. G., Omeziri, R. I. & Egbunike, C. F. (2019). Impact of dividend payout ratio on the value of firm: A study of companies listed on the Nigerian Stock Exchange. Indonesian Journal of Contemporary Management Research, 1 (1), 26-34.
[18] Murekefu, T. M. & Ouma, O. P. (2012). The relationship between dividend payout and firm performance: A study of listed companies in Kenya. European Scientific Journal, 8 (9), 199-215.
[19] Alam, S., Karim, R. & Karim, A. (2016). Analysis on factors that affect stock prices: A study on listed cement companies at Dhaka stock exchange. Research Journal of Finance and Accounting, 7 (18), 93-113.
[20] Shilo, S. J., & Mohammed, N. M. (2014). Effect of dividend payout on stock prices of quoted deposit money banks in Nigeria. Journal of Finance and Accounting Research, 6 (1), 100-109.
[21] Troudi, W. & Milhem, M. (2013). Cash dividend, retained earnings and stock prices: Evidence from Jordan. Interdisciplinary Journal of Contemporary Research in Business, 4 (12), 585-599.
[22] Miko, N. U., & Kamardin, H. (2015). Ownership structure and dividend policy of conglomerate firms in Nigeria. Academic Journal of Interdisciplinary Studies, 4 (2), 279-286.
[23] Odia, J. & Ogiedu, K. O. (2013). Payout policy, agency conflict and corporate governance in Nigeria. Review of Public Administration and Management, 2 (3), 48-61.
[24] Agyemang-Badu, E. (2013). Determinants of dividend payout policy of listed financial institutions in Ghana. Research Journal of Finance and Accounting, 4 (7), 185-190.
[25] Mehmood, Hunjre, & Chani, (2019). Impact of corporate diversification and financial structure on the firm performance: Evidence from South Asian Countries. Journal of Risk and Financial Management, 12 (49), 1-17.
[26] Oladipupo, A. O., & Ibadin, P. O. (2013). Does working capital management matter in dividend policy decision? Empirical evidence from Nigeria. International Journal of Financial Research, 4 (4), 140-145.
[27] Bushuru, R. W., Basweti, A. K., & Mukonyi, P. M. (2015). The relationship between working capital management and divided payout ratio of firms listed in Nairobi Securities Exchange. International Journal of Economics, Commerce and Management, 3 (11), 285-296.
[28] Olang, M. A., & Grace, A. M. (2017). Effect of Working capital on the Dividend pay-out by firms firms listed at the Nairobi Securities Exchange, Kenya. International Journal of Finance and Banking Research, 3 (2), 23-33.
[29] Kaźmierska-Jóźwiak, B. (2015). Determinants of dividend policy: evidence from polish listed companies. Procedia economics and finance, 23, 473-477.
[30] Yusof, Y. & Ismail, S. (2016). Determinants of dividend policy of public listed companies in Malaysia. Review of International Business and Strategy, 26 (1), 88-99.
[31] Elmagrhi, M. H., Ntim, C. G., Crossley, R. M., Malagila, J. K., Fosu, S. & Vu, T. V. (2017). Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate board characteristics. International Journal of Accounting and Information Management, 25 (4), 459-483.
[32] Eniola, O. J. & Akinselure, O. P. (2016). Impact of divided policy and earnings on selected Quoted companies in Nigeria. International Journal of Innovative Research and Development, 5 (6), 308-321.
[33] Bera, A. K. & Jarque, C. M. (1982). Model specification tests: A simultaneous approach. Journal of Econometrics, 20, 59-82.
[34] Granger, C. W. J. (1986). Development in the study of co-integrated economic variables. Oxford Bulletin of Economics and Statistics, 48, 213-227.
[35] Yusuf A., & Al Qudah A. (2015). Stock Price Volatility and Dividend Policy in Jordanian Firms. Research Journal of Finance and Accounting, 6; 22.
[36] Enekwe C. I., Agu C. I., & Eziedo K. N. (2015). The effect of financial leverage on financial performance: Evidence of quoted pharmaceutical companies in Nigeria. IOSR Journal of Economics and Finance. 5; 3; 17-25.
[37] Hansen D. R., & Mowen M. M. (2012). Managerial Accounting. Issue 8. Salemba Four. Cengage Learning.
[38] Ekwe M. & Inyiama O. (2014). Foreign Capital Flows and Growth of the Nigeria Economy: An Empirical Review. International Journal of Economics and Finance. 6; 4.
[39] Azhagaiah, R., & Priya, S. N. (2008). The impact of dividend policy on shareholders’ wealth. International Research Journal of Finance and Economics, 20, 180-187.
[40] Howatt, B. et al. (2009). Dividends, earnings volatility and information. Applied Financial Economics, 19 (7), 551-562.
Cite This Article
  • APA Style

    Ubesie Madubuko Cyril, Emejulu Callistus Emeka, Emejulu Callistus Emeka. (2020). Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria. Science Journal of Business and Management, 8(1), 7-15. https://doi.org/10.11648/j.sjbm.20200801.12

    Copy | Download

    ACS Style

    Ubesie Madubuko Cyril; Emejulu Callistus Emeka; Emejulu Callistus Emeka. Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria. Sci. J. Bus. Manag. 2020, 8(1), 7-15. doi: 10.11648/j.sjbm.20200801.12

    Copy | Download

    AMA Style

    Ubesie Madubuko Cyril, Emejulu Callistus Emeka, Emejulu Callistus Emeka. Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria. Sci J Bus Manag. 2020;8(1):7-15. doi: 10.11648/j.sjbm.20200801.12

    Copy | Download

  • @article{10.11648/j.sjbm.20200801.12,
      author = {Ubesie Madubuko Cyril and Emejulu Callistus Emeka and Emejulu Callistus Emeka},
      title = {Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria},
      journal = {Science Journal of Business and Management},
      volume = {8},
      number = {1},
      pages = {7-15},
      doi = {10.11648/j.sjbm.20200801.12},
      url = {https://doi.org/10.11648/j.sjbm.20200801.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20200801.12},
      abstract = {The study empirically analyzed the relationship between dividend policy and firm’s financial characteristics with a particular focus to consumer goods manufacturing companies in Nigeria. It utilized annual time series secondary data obtained from annual report and financial statements of the selected firms for the period of ten (10) years (2009-2018). Dividend policy was operationalized by Dividend per Share (DPS) and Dividend Payout Ratio (DPR) while the financial characteristics considered were Return on Assets (ROA), Return on Equity (ROE), and Earnings per Share (EPS). Ex-post facto research design was adopted while analytical techniques employed were Pearson Product Moment Correlation (PPMC) and Pairwise Granger Causality analysis mechanism. Findings revealed that Dividend per Share (DPS) interacts positively with the selected firm’s financial characteristics while there is a negative and insignificant relationship between Return on Assets (ROA), Return on Equity (ROE), and Dividend Payout Ratio (DPR) of the selected firms. A positive relationship was maintained between DPR and EPS for the period. Meanwhile, the link between ROA and DPS was significant at 5% level. More so, evidence from the pairwise granger causality test revealed that there is no directional relationship between dividend policy and financial performance of consumer goods manufacturing firms in Nigeria. On this background, the study suggested that the financial system be reformed to enhance the operational efficiency of the financial market so as to determine the profitability of quoted firms via the dividend policy channel. It was also recommended that Managers of consumer goods manufacturing firms in Nigeria should ensure that they have well-structured dividend policies in place as this will make the company shares attractive to investors and however lead to increased stock prices and enhanced profitability.},
     year = {2020}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Effect of Dividend Policy on Financial Performance of Consumer Goods Manufacturing Firms in Nigeria
    AU  - Ubesie Madubuko Cyril
    AU  - Emejulu Callistus Emeka
    AU  - Emejulu Callistus Emeka
    Y1  - 2020/01/31
    PY  - 2020
    N1  - https://doi.org/10.11648/j.sjbm.20200801.12
    DO  - 10.11648/j.sjbm.20200801.12
    T2  - Science Journal of Business and Management
    JF  - Science Journal of Business and Management
    JO  - Science Journal of Business and Management
    SP  - 7
    EP  - 15
    PB  - Science Publishing Group
    SN  - 2331-0634
    UR  - https://doi.org/10.11648/j.sjbm.20200801.12
    AB  - The study empirically analyzed the relationship between dividend policy and firm’s financial characteristics with a particular focus to consumer goods manufacturing companies in Nigeria. It utilized annual time series secondary data obtained from annual report and financial statements of the selected firms for the period of ten (10) years (2009-2018). Dividend policy was operationalized by Dividend per Share (DPS) and Dividend Payout Ratio (DPR) while the financial characteristics considered were Return on Assets (ROA), Return on Equity (ROE), and Earnings per Share (EPS). Ex-post facto research design was adopted while analytical techniques employed were Pearson Product Moment Correlation (PPMC) and Pairwise Granger Causality analysis mechanism. Findings revealed that Dividend per Share (DPS) interacts positively with the selected firm’s financial characteristics while there is a negative and insignificant relationship between Return on Assets (ROA), Return on Equity (ROE), and Dividend Payout Ratio (DPR) of the selected firms. A positive relationship was maintained between DPR and EPS for the period. Meanwhile, the link between ROA and DPS was significant at 5% level. More so, evidence from the pairwise granger causality test revealed that there is no directional relationship between dividend policy and financial performance of consumer goods manufacturing firms in Nigeria. On this background, the study suggested that the financial system be reformed to enhance the operational efficiency of the financial market so as to determine the profitability of quoted firms via the dividend policy channel. It was also recommended that Managers of consumer goods manufacturing firms in Nigeria should ensure that they have well-structured dividend policies in place as this will make the company shares attractive to investors and however lead to increased stock prices and enhanced profitability.
    VL  - 8
    IS  - 1
    ER  - 

    Copy | Download

Author Information
  • Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria

  • Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria

  • Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria

  • Sections