The Impact Of Dividend Policy Decision On Corporate Performance Of Listed Firms In Nigeria

The Impact Of Dividend Policy Decision On Corporate Performance Of Listed Firms In Nigeria

Abstract

This exploration examine the impact of tip policy decision on commercial performance of listed enterprises in Nigeria. It aims to ascertain if there’s any significant relationship between tip yield and share price of listed enterprises in Nigeria and determine the impact of retained earnings rate on the share price of Nigerian banks. Thecross-sectional exploration design was espoused in this study in the course of data collection. This is because the experimenter made compliances at a particular point in time and ki-square system was used in assaying the data gathered. Grounded on the findings of the exploration work, it was revealed that tip policy serve as a means of assessing organizational performance in Nigeria enterprises and the study also revealed that tip policy doesn’t garçon as a means for assessing but also expose bad practices and weakness in the internal control system. Eventually, it was recommended that associations should insure that they’ve a good and robust tip policy in place. This will enhance their profitability and attract investments to the associations and that directors of commercial associations should be made to modernize records of shareholders including their coming- of- kin to avoid a deliberate or overdue retention of unclaimed tip clearances.

Chapter One

Preface

Background to the Study

So numerous factors affect the performance of commercial association and one of those factors is tip policy. tip policy serves as a medium for conduct of a directorial opportunism.

The pattern of commercial tip programs not only varies across countries, especially between developed, developing and arising capitalmarkets.However, tip policy will affect directly the enterprises cost of capital, If the value of a company is the function of its tip payments. But is there any significant relationship between tip policy and commercial performance in form of profitability investment and earning per share? This is the question this exploration work will exfoliate further light on.

tip earnings decision is extensively considered in the business world as a strategic in commercial finance as well as commercial performance and growth. tip policy directly influences the behavioural pattern of the investors i.e. shareholders. Because the purchaser of the company( shareholders) actually buys a tip anticipation, because of the tip policy decision recrimination on the behavioural pattern of the shareholders be it positive or negative, the commercial world imposes the responsibility of this great task of the boardroom affair.

tip policy decision as a tool in the strategic commercial finance as well as commercial performance and growth affect the share price as well as cost of capital, in other words on option tip policy that maximizes the wealth of shareholder. Due to egregious reasons, shareholder considers incompetence to tip policy. The significance that the individual shareholder places on tips depends on his position of wealth and performance for capital earnings amongst others. In an terrain with progressive labor force income levies, the individual with further wealth will tend to proffer capital appreciation on shares than tips. At lower position of income, the capital gain duty rate, still, the reverse is the case with raised income. The fat individual among the different shareholders may also prefer capital appreciation on his share due to the forenamed reasons.

It’s frequently claimed that the company’s investment opinions and tip decision are independent of the shareholders decision. It should be noted that this might be entirely true, some are repay procedures that defended the aggressive shareholders. Beside these, the shareholders might exercise their right through the selling of their shares on the stock exchange and this has negative consequences on the value of the company’s share in the request which in turn affects the fortune of the company.

According to Modigliani and Muller( 1961), the impact of capital structure and tip performance has for times been an unsettled bone . Some pens are of the opinion that the way and manner in which the operation of a establishment is financed doesn’t affect the value of the establishment while some believe that the use of debt backing blend will magnify the value of the establishment if the fiscal director will be indifferent to the source of finance that applicable capital structure is a critical decision for any business association. The decision is important not only because of the requirements to maximize return to colorful association constituencies but also because of the impact such a decision has on the association’s capability to survive in its competitive terrain.

According to Modigliani and Muller( 1961), an optimal capital structure live which balance the threat of ruin with the duty saving of debt. It’s important to note that tip isn’t a construal obligation of a establishment to its shareholder or debt providers. The quantum of tip if any is rested on operation stylish option is to use the income. The board of directors who are eventually responsible for setting tip policy can chose not to pay any tip using the enterprises earning to acquire fresh asset rather.

In every business, capital structure is of primary significance. It shows the general public how a company finances its operations through some combination of equity debt etc. A establishment’s capital structure indicate how the company finances its entire operations and expansions by exercising different fiscal coffers whether it’s from equity, capital or other forms of capital similar as seller backing, which is the process of dealing goods or products before paying the bill to the seller. seller backing doesn’t bring anything to the company, rather, it gives further return on investments. It should also be noted that capital structure includes equity capital which is the plutocrat invested into a company in exchange for power interest in the company.

According to Pandey( 2005), entrepreneur generally starts their business with other stockholders in the business in order to contribute to the increase of the business capital. In this connection, the operation of the company is authorized to use the plutocrat collected to invest in the manufactories or factory and to buy share stock in the company, in this way, each stockholder owns shares or chance of the company through investing their plutocrat as part of the capital of the company.

nonetheless, tip policy refers to the company regulation and guidelines on tip payments to shareholders of the association. Having a tip policy is veritably essential for both the company and shareholders, it’s easier to cover and figure out the impact of the tip policy in the entire performance or operation of the business.

thus, tips are payments made by the pot to its shareholders when a company earns a design or fat and similar plutocrat can be used as retained earnings. Hence the capability of the company to pay tip can be stated to measure the sounded and profitability of a company.

Backing opinions determines the capital structure of the establishment and forms the source on which investment opinions are made. The third decision, tip decision which forms the focus of this study has to do with the determination of the tip payout espoused by the establishment in decoding the quantum of cash that’s given to shareholders. This decision is dependent on whether the implicit investors and shareholders likewise have a preference for capital gain as opposed to income.

thus commercial associations borrow tip policy that have the major end of maximizing shareholder’s wealth or put in a better perspective, adding their share price/ value. The fiscal directors for case have to decide on whether to borrow a high payout rate and turn around to adopt finances from the capital request for investment purposes or borrow a low payout rate and use the retained earnings in financing the investment openings current at that time. Others also borrow the styles of paying stock tips as well as cash tips depending on their shareholders ’ preference. The particular system a establishment adopts also depends on the prevailing economics situation at that time.

tip policy can best be seen as a pivot around which other fiscal programs operate since the other two opinions a director is faced with resoluteness around it. The fiscal decision and investment decision are both dependent on the quantum of retained earnings available and this is told by the tip policy.

tip policy is therefore one of the most important programs in commercial backing not only from the enterprises view point, but also from the point of view of shareholders nonsupervisory bodies and stakeholders.

Statement of Problem

Commercial association, banks inclusive are faced with the problem of whether to pay a larger, small or zero chance of their earnings as tips. This problem is born out of the desire to satisfy the colorful requirements of shareholders. Some shareholders have the need for income now and as similar will prefer a high tip payout rate which other who needs to invest in the future would prefer capital earnings. Due to the fact of having to deal with contending interests of colorful shareholders, the kind of tip policy a bank adopts could either lead to positive or negative goods on the share prices of the company. The directors are thus unfit to read with certainty to what extent the policy will affect their share price of their enterprises.

Exploration Questions

Should establishment’s payout plutocrat to their shareholders or invest for them?

, what chance of its earning is actually paid?

If tip payment is decided upon.

iii. Consequent upon the forenamed opinions how will this share price of the establishment be affected?

iv. What’s the relationship between tip yield and enterprises partake price?

What’s the impact of retained earnings rate on the share price of Nigerian enterprises?

ideal of the study

The general ideal of this study is to examine the impact of tip policy on share price valuation in Nigeria.

Specifically, this study sought to

Ascertain if there’s any significant relationship between tip yield and share price of listed enterprises in Nigeria.

ii. Determine the impact of retained earnings rate on the share price of Nigerian banks.

Statement of suppositions

In order to give a frame for assessing the impact of tip policy on share price valuation on listed establishment in Nigeria, the following suppositions were formulated;

thesis One

HO There’s no significant relationship between tip policy and commercial performance of listed enterprises in Nigeria.

HI There’s significant relationship between tip policy and commercial performance of listed enterprises in Nigeria.

thesis Two

HO There’s no significant impact of retained earnings rate on share price of listed enterprises in Nigeria.

HI There’s significant impact of retained earning rate on share price of listed enterprises in Nigeria.

thesis Three

HO There’s no significant relationship between tip yield and share price of enterprises.

HI There’s significant relationship between tip yield and share price of enterprises.

Significance of the Study

The study is salutary to numerous groups. It’s important to note that the study provides an avenue for an in- depth understanding of the content by fellow experimenter, fiscal directors, board of directors and other decision makers in formulating optimum programs for their separate enterprises.

The study also forms as a tool for aiding investors in making their investment opinions as well as abetting to expose the colorful factors that may impact stock prices.

The study further serves as experimenter accoutrements for unborn investors and also adds to the being body of knowledge.

Compass of the Study

The compass of this study gauged a period from 2003 to 2013, having 11 times period for the compass of the study. The study also concentrated on 14 enterprises including Nigerian banks( one, new generation and other the old generation). In an attempt to empirically dissect the effect of tip policy on share price valuation.

This compass was anticipated to give an accurate analysis and findings on the subject matter.

Limitations of the Study

In writing the design, so numerous problems were encountered which are listed below;

· Geographical content Factors that may probably affect the work is the issue of probing the concerned people in carrying out the exploration work.

· Problem of sourcing for material The exploration was faced with problems of getting current accoutrements , handbooks, journals and forum papers related to the subject matter.

Description of Terms

· tip This is a proportion of profit allocated by a establishment to its common shareholders.

· tip Decision This is the trade- off between paying out cash and issuing new share on one hand and retaining earning on the other hand.

· tip Per Share The introductory cash flows passed from the establishment to its stakeholders.

· tip Policy Decision made by the board of directors as to the quantum by divided outstanding to equity holders.