The propensity to pay dividends among Nigerian listed companies
This study examined the disappearing dividend phenomenon in the Nigerian market from 2003 to 2012. It also investigated the impact of financial crisis on the payout decisions. The dividend pattern was explained using descriptive analysis. Panel logistic regression was employed to explain the determ...
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| Format: | Thesis |
| Language: | eng eng |
| Published: |
2015
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| Subjects: | |
| Online Access: | https://etd.uum.edu.my/5220/1/s94258.pdf https://etd.uum.edu.my/5220/2/s94258_abstract.pdf |
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| Summary: | This study examined the disappearing dividend phenomenon in the Nigerian market from 2003 to 2012. It also investigated the impact of financial crisis on the payout decisions. The dividend pattern was explained using descriptive analysis. Panel logistic regression
was employed to explain the determinants of the choice "to pay" or "not to pay" dividends while multinomial logistic regression was used to examine the determinants of four mutually exclusive payout choices. Findings indicate a reduction in the proportion of dividend payers and the amount of dividends paid in the latter years. Determinants of the choice "to pay" or "not to pay" include foreign ownership, retained earnings to total equity, profitability, cash flow and past dividends. Thus, the study supports the clientele effect, free cash flow hypothesis and dividend smoothing hypothesis in explaining the decision "to pay" or "not to pay" dividends. However, the implication stated in the catering theory is not supported in the binomial model. Multinomial estimates revealed that firms alter their payout decisions in line with the necessity to maintain financial flexibility and to mitigate going concern risks during the crisis. Firms with higher leverage and lower cash flows have a higher likelihood to omit dividends during the crisis. Thus, free cash flow and transaction costs hypothesis became relevant during crisis. Clientele effect which was supported in the pre-crisis period became insignificant during the crisis. Catering theory became relevant during crisis as investor's demand for dividends have a positive impact on dividend- increase decisions. In consistency with dividend smoothing hypothesis, results indicate that some firms endeavour to maintain their dividend levels despite the crisis. Profitability as a characteristic of a dividend payer is significant in the crisis and the non-crisis periods. The study found no evidence in support of the implication stated in the life cycle theory |
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