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 hypotheseswere premised are; on the popular dividend relevance and irrelevance theories. Dividendpolicy scholars argued that it expresses information content about future prospects andcashflow of the firm. Irrelevance proponents hinged their argument on the point that all that isnecessary is the investment policies and risk of an enterprise in maximizing shareholderswealth. The latter proponents advanced their theories in favour on capital and future gainsinpreference to immediate payment of cash in form of dividend. This study centered oneffectsof dividend policy on share price of selected quoted companies in Nigeria with dividendper-share, earnings per-share and profitability taken as endogenous variables. Thirteenquotedcompanies on the floor of the Nigeria Exchange (NGX Group) using randomsamplingwereused. Pooled OLS regression with fixed and random effects models were employedforestimation. The fixed effects model was preferred as the efficient estimator for the studyandthe results revealed that dividend per share has inverse and statistically insignificant effectswith share price, likewise; earnings per share. Profitability has positive but insignificant
effect on share price.