Dividend Policy and Shareholders’ Wealth among Financial and Non-Financial Firms

Publication Date: 21/08/2020

Author(s): Dr. Udoka Bernard Alajekwu, Prof. Vincent N. Ezeabasili, Dr. Pius V. C. Okoye, Prof. Steve N. Ibenta.

Volume/Issue: Volume 3 , Issue 3 (2020)


Firms are at liberty to adopt a dividend policy that best supports the attitude of their investors. Shareholders however, seeks to look out for high paying investments with an acceptable risk. The peculiarities of financial services and non-financial services firms in Nigeria presumes that shareholders may react differently to dividend policies in both sectors. This study therefore investigated the effect of dividend policy on shareholders’ wealth among 19 financial and 41 non-financial, with eleven-year period spanning 2006 to 2016. The Chow and Hausman tests were relied on to adopt the Fixed Effect for the financial services sector model and Random Effect for the non-financial services sector model. The findings showed that dividend policy and its control variables accounted for 70% and 67% of the variation in shareholders’ wealth of the financial services and non-financial services sub-sector in Nigeria. For the financial services firms, none of the dividend policy variables (dividend payout and dividend yield) had a significant contribution to shareholders’ wealth; while dividend payout had a positive and significant effect on shareholders’ wealth in the non-financial services firms. The moderating variables of a dividend policy that can influence shareholders’ wealth in the financial services firms are positive effects of the firm size and growth opportunities while the positive effect of firm size and profitability drives dividend policy influence in the non-financial services sub-sector. The study thus posit that dividend policies drives shareholders wealth in non-financial firms, which implies that investors in non-financial services sector prefers dividend returns to other forms of investment returns like capital gains.

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