Determinants of Dividend Policy: Controlling for Political Stability in Pre-crisis, Crisis and Post-Crisis Periods
The paper examines the factors that influence the dividend policy of Nigerian Deposit Money Banks in the presence of political violence that affects the business environment for the period 2006 to 2015. Correlational research design was adopted. The population of the study comprises all the Deposit Money Banks functioning in Nigeria as at 31 December, 2015 with sample size of 15 Deposit Money Banks listed at the Nigerian Stock Exchange as at 31st December 2015. The data were extracted from the audited financial reports of the banks and the World Bank Development Indicator within the period of the study. The data were analysed through panel data regression. We found that board independence, board size, earnings per share, and non-executive director do not significantly affect dividend per share (DPS) in pre-crisis, crisis and post-crisis periods. The study however revealed that both firm size and political stability significantly affect dividend per share in both pre-crisis and crisis periods but not in the post-crisis period. Political stability has positive effect on DPS in crisis period while a negative effect in pre-crisis period. We also document that the contributing effect of firm size on DPS is higher in crisis period than pre-crisis period. The study documents the dividend policy pattern in the presence of political stability during crisis and non-crisis periods. The study recommended that the management team needs to strive for higher profitability, larger firm size, higher risk premium to satisfy the shareholders’ goal of wealth maximization in the form of higher dividends.
Dividend Policy, Political Stability, Crisis, Deposit Money Banks
[1]
Akani, H. W., & Sweneme, Y. (2016). Dividend policy and the profitability of selected quoted manufacturing firms in Nigeria: An empirical analysis. Journal of Finance and Accounting, 4(4), 212-224.
[2]
Anand, M. (2004). Factors influencing dividend policy decisions of corporate India. ICFAI Journal of Applied Finance, 10(2), 5-16.
[3]
Asekome, M. O., & Abieyuwa, A. J. (2014). Challenges of banking sector reforms in Nigeria: An appraisal. International Journal of Business and Social Science, 5(7), 224-230.
[4]
Baldacci, E., Gupta, S., & Mulas-Granados, C. (2012). How effective is fiscal policy response in financial crises? (Online). Avalaible at: https://www.imf.org/external/np/seminars/eng/2012/fincrises/pdf/ch14.pdf (Accessed: 10 March 2017).
[5]
Banerjee, S. (2016). Determinants of dividend policy for selected information technology companies in India: An empirical analysis. Parikalpana - KIIT Journal of Management, 12(I), 11-17..
[6]
Bishop, S. R., Harvey, R. C., Robert. W. F. & Garry, J. T. (2000). Corporate finance. Sydney: Prentice Hall Inc.
[7]
Claessens, S., & Kodres, L. E. (2014). The regulatory responses to the global financial crisis: Some uncomfortable questions. IMF Working Paper, IMF, Washington, D.C
[8]
DeAngelo, H., DeAngelo, L., & Stulz, R. (2006). Dividend policy and the earned/contributed capital mix: A test of the life-cycle theory. Journal of Financial Economics, 81(2), 227-254.
[9]
Echchabi, A., & Azouzi, D. (2016) Determinants of dividend payout ratios in Tunisia: Insights in light of the Jasmine Revolution; Journal of Accounting, Finance and Auditing Studies, 2(1), 1-13.
[10]
Elmi M. A., & Muturi, W. M. (2016). Effects of profitability on dividend payout by commercial and services firms listed in the Nairobi securities exchange. European Journal of Business and Social Sciences, 5(2), 160–167.
[11]
Fama, E. F. & French, K. R. (2004). The capital asset pricing model: Theory and evidence. Journal of Economic Perspectives, 18(3), 25-46.
[12]
Gill, S., & Obradovich, D. J. (2012). Corporate governance, institutional ownership, and the decision to pay the amount of dividends: Evidence from USA. International Research Journal of Finance and Economics, 9(7), 60-71.
[13]
Gordon, M. J. (1963). Optimal investment and financing policy. The Journal of Finance, 18(2), 264-272.
[14]
Greene, W. H. (2003). Econometric analysis. India: Pearson Education.
[15]
Hauser, R. (2013). Did dividend policy change during the financial crisis? Managerial Finance, 39(6), 584-606.
[16]
Hillier, D., et al. (2010). Corporate finance (European ed.). England: McGraw-Hill.
[17]
Idowu, K. A., & Adeneye, Y. B. (2017). Inequality and economic growth: An analysis of 8-Panels. Journal of Economics and Public Finance, 3(2), 173-187.
[18]
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
[19]
Khan, M. N., Naeem, M. U., Rizwan, M., & Salman, M. (2016). Factors affecting the firm dividend policy: An empirical evidence from textile sector of Pakistan. International Journal of Advanced Scientific Research and Management, 1(5), 144-149.
[20]
Kim, J. I. (2011). Global policy challenges in the post-crisis period. In Federal Reserve Bank of San Francisco Proceedings (No. Nov, pp. 353-359).
[21]
Kuzucu, N. (2015). Determinants of dividend policy: A panel data analysis for Turkish listed firms. International Journal of Business and Management, 10(11), 149-160.
[22]
Lintner, J. (1962). Dividends, earnings, leverage, stock prices and supply of capital to corporations. The Review of Economics and Statistics, 44(3), 243-269.
[23]
M’rabet R., & Boujjat, W. (2016). The relationship between dividend payments and firm performance: A study of listed companies in Morocco. European Scientific Journal, 12(4), 469-482.
[24]
Mahdzan, N. S. Zainudin R., & Shahri, N. K. (2016) Interindustry dividend policy determinants in the context of an emerging market. Economic Research-Ekonomska Istraživanja, 29(1), 250-262.
[25]
Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth and the valuation of shares. Journal of Business, 34(4), 411-433.
[26]
Moradi, M., Salehi, M., & Honarmand, S. (2010). Factors affecting dividend policy: Empirical evidence of Iran. Poslovna izvrsnost, 4(1), 45-61.
[27]
Mui, Y. T. & Mustapha M. (2016). Determinants of dividend payout ratio: Evidence from Malaysian public listed firms. Journal of Applied Environmental and Biological Sciences, 6(1S), 48-54.
[28]
Mundati, Z. W. (2013). The effects of macroeconomic variables on the dividend payout of firms listed at the Nairobi Securities Exchange (Doctoral dissertation, University of Nairobi).
[29]
Muravyev, A., Talavera, O., & Weir, C. (2016). Performance effects of appointing other firms’ executive directors to corporate boards: an analysis of UK firms. Review of Quantitative Finance and Accounting, 46(1), 25-45.
[30]
Nworji, I. D., Adebayo, O., & David, A. O. (2011). Corporate governance and bank failure in Nigeria: Issues, challenges and opportunities. Research Journal of Finance and Accounting, 2(2), 1-19.
[31]
Pallant, J. (2013). SPSS survival manual. UK: McGraw-Hill Education.
[32]
Pandey N. S., & Ashvini. N (2016) A study on determinants of dividend policy: Empirical evidence from FMCG sector in India. Pacific Business Review International, 1(1), 135-141.
[33]
Pat, D., & James, O. (2011). Effects of the consolidation of the banking industry on the Nigerian capital market. Journal of Economics, 2(1), 57-65.
[34]
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2002). Corporate finance (6th ed.). Singapore: McGraw-Hill.
[35]
Rozeff, M. S. (1982). Growth, beta and agency costs as determinants of dividend payout ratios. Journal of Financial Research, 5(3), 249-259.
[36]
Smits, R. (2012). Effect of a financial crisis on the dividend payout policy of a firm. Thesis submitted to Accounting Department Faculty of Economics and Business Studies, Tilburg University.
[37]
Somoye, R. O. C. (2011). The role of financial intermediation in entrepreneurship finance in Nigeria. Thesis in Partial Fulfillment of the Business School, Faculty of Business and Creative Industries, University of the West of Scotland, Scotland United Kingdom, for the Award of Doctor of Philosophy (Ph.D.).
[38]
Soondur. S. A. K., Maunick. D, & Sewak. S, (2016) Determinants of the Dividend Policy of Companies Listed on the Stock Exchange of Mauritius Proceedings of the Fifth Asia-Pacific Conference on Global Business, Economics, Finance & Social Sciences, Ebene-Mauritius, 21-23.
[39]
Thomas, V. P. (2013). The effect of board characteristics on dividend policy. Department of Finance, Tilburg School of Economics and Management. 1-62.
[40]
Ukiwo, U. (2011). The Nigeria state, Oil and The Niger Delta. In Obi, C. & Rustad S. A (Ed) London/New York: 2 Ed Books.
[41]
Ullah, H. Fida, A., & Khan, S. (2012). The impact of ownership structure on dividend policy: Evidence from emerging market KSE-100 Index Pakistan. International Journal of Business and Social Sciences, 3(9), 298-307.
[42]
Van Horne, J. C. (2002). Financial management policy (12th ed.). New Delhi: Prentice-Hall of India.
[43]
Wilkin, S. (2017). Managing political risk in advanced economies. Journal of Risk Management in Financial Institutions, 10(1), 7-11.
[44]
Yusof, Y., & Ismail, S. (2016). Determinants of dividend policy of public listed companies in Malaysia. Review of International Business and Strategy, 26(1), 88-99.
