Trend of Dividends Policy in Nigeria

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DIVIDEND POLICY AND SHAREHOLDERS WEALTH MAXIMIZATION:
A STUDY OF SELECTED QUOTED FIRMS ON THE NIGERIA STOCK EXCHANGE (NSE)

BY

ABDULLAHI BASHIR MUHAMMED
DEPARTMENT OF BANKING AND FINANCE
FACULTY OF MANAGEMENT SCIENCE
UNIVERSITY OF Abuja
PHONE NO: 08065727548,
E-MAIL: Bash7th@yahoo.com

ISMAILA DADDY ABUBAKAR
DEPARTMENT OFECONOMICS
UNIVERSITY OFABUJA
PHONE NO: 08030596520
E-MAIL: abu4rim@yahoo.com

AHMED TIJANI ABDULMAJEED
DEPARTMENT OF ECONOMICS
UNIVERSITY OF ABUJA
PHONE NO: 08036199688
E-MAIL: tijaniabdulmajeed@yahoo.co.uk

Abstract
Dividend policy is the guiding principle that determines the portion of a company’s net profit after taxes that would be distributed to shareholders during a particular year. Dividend takes the form of cash or bonus shares. This study therefore explores the impact of dividend policy on shareholders wealth in some selected quoted firms. Econometrics method is employed with three distinct model specifications to reveal the impact of dividend policy on shareholders wealth and dividend per share as well as the impact of profit after tax on dividend per share for the period 2004-2010. The study reveals that dividend policy significantly impact as well as account for large variation in shareholders wealth and actual dividend payable per share. It also shows that profit after tax is a significant determinant of the magnitude and changes associated with dividend payable per share. Findings from the study lend support to the dividend relevance theory but cast serious doubt on the claim of dividend irrelevance theory. Therefore, cash dividend payment should be encouraged among firms while financial managers should strive hard to enhance shareholders wealth by employing relevant dividend policy and investment strategies that result in higher profitability and dividend per share.

INTRODUCTION
Stock exchange is a financial institution that exercises tremendous influence in the economic activities of nation by facilitating the collection of saving and channeling them to investments. The stock exchange is a network of individual institution and instrument in the effective allocation of fund from surplus to deficit economic unit (Alile and Anao, 1986). Its main function is to assist in mobilization and allocation of a nation’s capital resources among numerous competing alternative uses by providing an efficient market place for the trading of financial institution. It creates opportunities for investors to buy and sell government securities and stock/share of companies of their pries. It generally performs the role of spreading the ownership base and subsequent benefit to the public and thereby preventing monopoly. The Nigeria Stock Exchange (NSE) has at its objectives the creation of an appropriate mechanism to aid the formation of capital and instrument created and issued by the corporate bodies and government that are in need of funds to finance expansion or development project to ensure transfer of funds with ease in the capital market. The participants include the general public, Securities and Exchange Commission issuing houses and stock broking firms. According to the fact book NSE (1997) the market is the only perfect type of organized market in that the commodities trade on it has little or no cost are imperishable and entirely standardized. It enables the holder of securities to convert them into cash quickly and without Union variances and also at a comparatively moderate cost. By evaluating the securities, it acts as a barometer of the state of health of the individual companies. The exchange ensure that quoted companies provide the complete information in their annual account and report submit quantity progress statement and keep within the status the requirement of the exchange in the publication of their annual report and payment of benefit in the form...
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