Investigating Dividends Policy and Market Value of Shares in Selected Quoted Deposit Money Banks in Nigeria

Dividend policy is a critical decision area, it is one of the most important financial policies decision, not
only from the viewpoint of the company, also from that of the shareholders and other stakeholders.
This study examined the relationship between dividends policy and market value of shares of quoted
deposit money banks in Nigeria in relation with the restriction of dividend payments as spelt out in
Section 17 of the Banks and Other Financial Institutions Act (2007). The objectives of the study were:
to ascertain the relationship between dividend pay-out ratio; earnings per share; profit after tax; and
market value of shares. The study was predicated on dividend relevance theory and irrelevance
theory of dividend. The panel data research design methodology was adopted using secondary data.
The secondary data were obtained from annual reports of the ten quoted deposit money banks. The
multiple regression i.e. Panel Least Square method was used to test the relationship between the
variables for the period 2001-2017. The results showed that dividend policy has a positive significant
impact on market value of shares of deposit money banks in Nigeria, implying that all variables
relating to dividend policy in the study under the period specified contributed positively and strongly to
the market value of shares of deposit money banks listed in the Nigerian Stock Exchange. The study
concluded that dividend policy is a pertinent corporate finance function and financial policy decision
which affects the market value of shares of deposit money banks in Nigeria not only from the view
point of the banks’ shareholders but also from that of stakeholders such as employees and regulatory
bodies. The study therefore recommended that, managements of quoted deposit money banks
should take all necessary steps to ensure that they remain profitable. They should pay attention
to their dividend pay-out in order to sustain their shareholders' wealth and attract prospective
investors.