Topics: Dividend yield, Dividends, Pearson product-moment correlation coefficient Pages: 33 (5157 words) Published: August 2, 2015
Accounting and Management Information Systems
Vol. 11, No. 3, pp. 442–454, 2012

Uwalomwa UWUIGBE1
Covenant University, Ogun State, Nigeria
Auchi Polytechnic, Edo State, Nigeria
Anijesushola AJAYI
Covenant University, Ogun State, Nigeria
This study basically investigates the relationship between the financial performance and dividend payout among listed firms’ in Nigeria. It also looks at the relationship between ownership structure, size of firms and the dividend payouts. The annual reports for the period 2006-2010 were utilized as the main source of data collection for the 50 sampled firms. The regression analysis method was employed as a statistical technique for analysing the data collected. We find that there is a significant positive association between the performance of firms and the dividend payout of the sampled firms in Nigeria. The study also revealed that ownership structure and firm’s size has a significant impact of the dividend payout of firms too.

Financial performance, annual reports, firms, ownership structure, dividend policy, dividend payout, Nigeria
The issue of dividend policy is a very important one in the current business environment. Dividend policy remains one of the most important financial policies not only from the viewpoint of the company, but also from that of the shareholders, the consumers, employees, regulatory bodies and the Government. For a company, it is a pivotal policy around which other financial policies rotate (Alii et al., 1993). Dividend or profit allocation decision is one of the four decision areas in finance. Dividend decisions are important because they determine what funds flow to investors and what funds are retained by the firm for investment (Ross et al., 1

Correspondence address: Uwalomwa Uwuigbe, Department of Accounting, School of Business, College of Development Studies, Covenant University, Ota, Ogun State, Nigeria; Tel. +234-8052363513; Email: uwalomwa.uwuigbe@covenantuniversity.edu.ng

Dividend policy and firm performance: a study of listed firms in Nigeria

2002). More so, they provide information to stakeholders concerning the company’s performance. Firm investments determine future earnings and future potential dividends, and influence the cost of capital (Foong et al., 2007). The survival of any company is dependent on the continuous investment in facilities and the employment of internal financing, through the use of retained earnings from an integral part of the sources of finance to foot the investment needs (Bajaj & Vijh 1990; Osaze & Anao, 1990). Government fiscal policies tend to put some restrictions on the amount of dividend a company may pay. This invariably has forced part of the realized profits to be ploughed back. This was very obvious during the indigenization exercise of the seventies. The restriction is further strengthened by section 379 (2) of the company and allied matters act (CAMA) 1990, which provides that the general meeting shall have power to decrease the amount recommended. One of the reasons behind the dividend decision policy of the Nigerian government is to ensure that funds are available for continuous investment in assets, so that the companies will continue to operate on the going concern principle. The realization of the laudable goals of entrepreneurial investment in Nigeria has been inhibited by lack of sufficient funds. In fact the low level of investment capital available to most industrial organisations has accounted for the low capacity utilization.

The Manufacturers Association of Nigeria recently put this at below 30% (Nigeriabusinesslnfo.com). As one of the responses to the agony of capital shortage in the industrial sector, government initiated the deregulation of the capital market. The excess was to foster a developed capital market. However, irrespective of the various laudable efforts...

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