Evaluation Of Corporative Performance Variables That Determine Dividend Payout Polices Of Nigeria Breweries Plc [2009- 2014]
Abstract
The corporate performance elements in this study that affect Nigerian company dividend payout policy. The researcher looked at how Nigerian companies’ earnings per share and dividends per share related to one another. evaluated the connection between Nigerian company dividend payment ratio and firm size. examined the connection between a company’s return on assets and its dividend per share. The annual reports of the three brewing businesses chosen for the study—Nigeria brewing Plc, Guinness Nig. Plc, and Champions Brewery Plc—as well as journal papers on the topic served as the primary data sources. Eview was used to analyze the data. The outcome showed that the highest values of these series for dividend per share (DPS), earnings per share (EPS), firm size, and return on assets (ROS), respectively, are 0.700000, 1.740000, 1.90E +09, and 0.990000. Dividend per share (DPS) minimums are 0.200000, 0.060000, 1.92E +08, and 0.150000. the size of the company, earnings per share, and return on assets. The kurtosis coefficients for dividends per share and return assets, at 3.8803 and 1.722689, respectively, are far outside the bounds of normalcy. Significant probabilities have been reported for dividend per share, earnings per share, business size, and return on assets (ROA). In Jarque-Bera statistics, profits per share and business size have p-values of 0.763668 and 0.6173 correspondingly, while values 0.266546 and 0.812933. The researcher also noted a negligible correlation between dividend yield and earnings per share for Nigerian brewery companies. Additionally, it was noted that there is a significant correlation between Nigerian company dividend payment ratio and business size. The study also found that the effect of return on assets on the dividend per share of Nigerian companies is negligible. The researcher advises firms to make sure they have a strong and reliable dividend policy in place based on the findings. This will increase their profitability and draw in investors for the businesses. To prevent a planned diversion or excessive holding of unclaimed dividend warrants, company directors should be required to update the records of shareholders, including their next-of-kin. The required processes for the recognition and use of profit resulting from the investing of unclaimed dividends should be carried out. To compel directors to exclusively participate in profitable businesses and to record the application of retention earnings through notes to the accounts, a more strict level of condition should be imposed.
Chapiter 1
Introduction
1.1 Study’s Background
Dividend policy is one of the numerous elements that impact corporate organizations’ performance. A management opportunism can be controlled through dividend policy. Empirical research demonstrates that businesses in developing nations, such as Nigeria, smooth their income and, consequently, their dividends. Corporate dividend policies differ over time and between nations, particularly between developed, developing, and emerging capital markets. If a corporation’s dividend payments determine its worth, then the dividend policy will have a direct impact on the cost of capital for the company.
According to Eriki and Okafor (2002), a dividend is the profit that investors receive as a result of their investment in the company’s stock. A difficult choice for both public and private limited companies is to determine the appropriate level of dividend to be paid to shareholders, as well as whether or not to offer non-cash alternatives like scrip dividends. Dividend policy, on the other hand, is concerned with the division of net profit after taxes between payments to shareholders (ordinary shareholders) and retention for reinvestment on behalf of the shareholders (Kempner 1980).
The investigation of the evidence for both shareholder clienteles and any potential interactions between firms’ dividend policies and important operations like internal investments is prompted by the occurrence of some share price reactions upon dividend announcement, according to Davidson (1990). Cross-sectional fluctuations in dividend policy are therefore caused by an underlying issue since a component of the idea of dividend policy is a continuum of control allocations between managers and investors. Not because of issues with agency or private information, but rather because of potential discrepancies in beliefs that may result in a dispute over the worth of projects that are available to the firm, the distribution of controls between the manager and investors is crucial. The “Corporate Performance” component is the fundamental factor.According to Samuel (1989), “Corporate performance is at the heart of the managerial function of an organization.” The development of a modeling methodology to aid in the diagnosis of past performance and afterwards give a framework for analyzing the impact of changes in operating parameters as a reference for future planning is the major goal of corporate performance analysis. The decision of the management form of wealth to be held is a key performance indicator for an organization. There will be little to no conflict between management and stockholders if a firm is performing well.
In measuring corporate performance, the focus is on determining how efficient and effective the organization’s existing behavior is. For each of these viewpoints, particular measures for attaining these goals are established in order to gauge overall business success. To attain total efficiency and effectiveness and to be successful in the long run, each of these views is essential and needs to be taken into account concurrently. Performance evaluation will become “unbalanced” if any aspect is either overemphasized or underemphasized. The idea is to provide a set of metrics, both financial and non-financial, through which a business may manage its operations and balance many metrics to accurately track success.
According to Modigliani and Miller (1961), “Dividend relevance or dividend irrelevance theory can be used to describe the theoretical principles underlying the dividend policy and its impact on firms.” Therefore, in a world without taxes or transaction costs, dividend policy has no bearing on the cost of capital and the value of the firms. This demonstrates that the expected return needed to persuade investors to hold a firm’s shares will be independent of how the firm structures its dividend payments and fresh share issuances. Investors can generate any income pattern by purchasing and selling shares. It should be noted that a company’s assets, investment prospects, anticipated future net cash flows, and capital cost are unaffected by the decisions made about its dividend policy.
Dividend payments and leverage policies, according to Agrawal and Jayaraman (2004), are replacement mechanisms for regulating the agency cost of free cash flow, which enhances performance. The level of activity within an organization will rise to generate more income and have surplus retained earnings to fulfill the standard set if a firm’s policy is to pay dividend to shareholders each year end.
According to Brockington (1987), “Dividend policy has the effect of destabilizing the dividend because only a prolonged increase or decrease in profits will affect the average sufficiency to have any appreciable effect on the size of the distribution.” Because it is a cautious dividend policy, there will be significant accumulation of retained earnings over time because only half of all profits will be released. The consistency of dividends, which could be maintained for a while even in the face of actual losses, will unquestionably be further reinforced by this. It might also spare the business from using outside sources of funding. There is no connection between the retention under this policy and the availability of successful investment opportunities. The danger is that funds that would otherwise sit idle would be absorbed by ventures that produce less than their true cost of capital. According to Samuels and Wilkes (2005), the shareholders are entitled to a dividend income stream. The present value of this sequence of dividend payments is equal to the share’s value.
1.2 An explanation of the issues
Developing economies have long understood the significance of dividend payments as one of the factors affecting a firm’s economic performance (Oyejide, 1976). Early dividend policy studies in Nigeria aimed to emphasize the payout strategy used by Nigerian businesses throughout the indigenization era. Inanga (1975), Uzoaga and Alozienwa (1974), and Soyode (1976). These studies don’t conduct their research using the traditional dividend models. In an effort to explain the dividend policy of Nigerian firms at various times, later studies such as Oyejide (1976), Izedonmi and Eriki (1996), and Adelegan (2000 and 2001) tested the application of Lintner’s model and the modified Lintner-Britain model. However, the majority of these studies acknowledged the dynamic character of the Nigerian economy and the need for additional research to support the study’s findings.
There haven’t been many in-depth studies on the dividend policy of the financial sector as a driver of economic growth. In order to determine the growth pattern and factors influencing the dividend policy in Nigerian Deposit Money Banks (DMBs), this study offers an empirical foundation. Based on the explanatory variables established from earlier studies and legal concerns, it is anticipated that this will offer useful explanation on the dividend policy of Deposit Money Banks (DMBs) in Nigeria. The study also investigates the impact and connection between dividend growth patterns and the stock price of Deposit Money Bank.
Legally, the directors in Nigeria are free to decide whether to pay dividends, although there are obviously restrictions. Legal regulations impose some limitations, while financial considerations impose others. In order to help the board of directors use their judgment in making prudent dividend decisions, the level of influence of various restrictions and variables has been assessed.
1.3 Study’s objectives
The purpose of this research project is to study corporate performance factors that affect Nigerian company dividend distribution practices. The following are some of the research’s specific goals:
1. To investigate the connection between the dividend per share and earnings per share of Nigerian enterprises.
2. To assess the connection between Nigerian company dividend payment ratio and firm size.
3. To investigate the connection between the dividend per share and return on assets of Nigerian enterprises.
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