EXAMINING THE FACTORS INFLUENCING THE CHOICE OF DIVIDEND POLICY OF BANKS IN NIGERIA

Murtala Aliyu IBRAHIM

Abstract


Abstract

The purpose of this study is to examine the factors influencing the choice of dividend in Nigeria with specific interest in the banking sector. The research conducted a survey of some selected banks listed on the Nigerian Stock Exchange (NSE) and the result of the survey formed the basis of hypotheses testing and analysis of annual accounts of the selected banks.

 

Adhering to the criteria established by the researcher, eleven of the 24 banks emerged as the sample of the population of the study. All the eleven banks were selected as the sample. Questionnaires were issued to top management staff of the sampled and were asked to provide information about the level of importance of the seventeen (17) identified factors that influence their dividend decisions. A distinctive line was drawn at 60% level of importance and six factors emerged as the most important factors by the respondents. These were later subjected to statistical analysis using regression analysis, Chi-square and Person correlation to analyze the secondary data from annual accounts of the sample.

 

The result confirms the earlier findings of Linter (1956) that managers base their dividend decisions on the pattern of past dividend and also suggests a significant difference between the responses of the older and newer generation of banks in Nigeria. Moreover, strong relationship was found to exist between taxes and dividend policy of banks in Nigeria.

 

Finally, in the light of findings of the paper, the study recommends that managers should not always base their dividend decision on the literature alone but should also consider the peculiar circumstances of the moment for the decision to be taken. Moreover, managers of newer generation should be conscious of the fact that size and past years of operation are advantage to their competitors as such should not be lured to making decisions on competitive ground that will have a negative impact on their corporate success.


Keywords


Bank, Dividend, Return on Investment

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