EFFECT OF DIVIDEND POLICY ON SHARE PRICE MOVEMENT OF SELECTED QUOTED COMPANIES IN NIGERIA

Abstract

Dividend Policy remains a contentious area of corporate finance with a school of thought indifferent and another in support. The two contending views under which other hypotheses were premised are; on the popular dividend relevance and irrelevance theories. Dividend policy scholars argued that it expresses information content about future prospects and cash flow of the firm. Irrelevance proponents hinged their argument on the point that all that is necessary is the investment policies and risk of an enterprise in maximizing shareholders wealth. The latter proponents advanced their theories in favour on capital and future gains in preference to immediate payment of cash in form of dividend. This study centered on effects of dividend policy on share price of selected quoted companies in Nigeria with dividend per-share, earnings per-share and profitability taken as endogenous variables. Thirteen quoted companies on the floor of the Nigeria Exchange (NGX Group) using random sampling were used. Pooled OLS regression with fixed and random effects models were employed for estimation. The fixed effects model was preferred as the efficient estimator for the study and the results revealed that dividend per share has inverse and statistically insignificant effects with share price, likewise; earnings per share. Profitability has positive but insignificant effect on share price.