Dividend Policy and Market Value of Quoted Firms: A Test of MM Hypothesis from Nigeria Financial Market
Vol.6 Issue 2
This study tested the relevance and irrelevance of dividend policy hypothesis on quoted manufacturing firms in Nigeria. Panel data were collected from annual reports of 22 manufacturing firms from 2009- 2018. Market value was modeled as a linear function of dividend payout ratio, retention ratio, dividend yield and dividend per share. Ordinary least square method of multiple regressions was used as data analysis method. After cross examination of the models, the fixed and the random effect model was adopted. The study found that dividend yield, retained earnings and dividend payout ratio has negative effect while dividend per share has positive effect on market value. From the findings, the study concludes that dividend policy is relevant and rejects the MM irrelevant hypothesis. From the findings, the study recommend that the manufacturing firms should maintain constant dividend policy according to the signaling hypothesis, this will signal positive information to investors and affect positively value of the firms. Management should devise measures of managing shareholders to achieve shareholders wealth maximization through dividend policy and the operational environment of the quoted manufacturing firms should be integrated with the companies’ operating objectives to achieve the objective of the shareholders.
