Title: Dividend Policy And Market Valuation Of Firms In Nigeria
Authors: Isibor Lily Onome, Professor Ehiedu Victor C.
Volume: 9
Issue: 5
Pages: 97-104
Publication Date: 2025/05/28
Abstract:
Dividend policy continues to be a central issue in corporate finance, with significant implications for shareholders' wealth and market valuation. Despite the wealth of global literature, the relationship between dividend decisions and market valuation remains inconclusive, particularly in emerging markets where capital markets are still developing and corporate governance structures vary widely. In Nigeria, dividend policy assumes even greater relevance given the volatility in the financial markets, fluctuating macroeconomic indicators, and investor preference for stable income streams amidst uncertain capital gains prospects.This study investigates the impact of dividend policy on the market valuation of firms listed on the Nigerian Exchange Group (NGX). Specifically, it examines whether dividend payout ratios, dividend yield, and dividend per share significantly influence market price per share and overall firm valuation. A mixed-method research design was adopted to ensure a comprehensive understanding of the subject. Quantitative data covering a panel of 50 firms across major sectors (banking, manufacturing, oil and gas, and consumer goods) from 2013 to 2023 were collected from published annual reports and market data. The analysis employed descriptive statistics, correlation matrices, and fixed and random effects panel regression models to examine the relationship between dividend policy variables and market valuation metrics.Complementing the quantitative data, qualitative insights were obtained through semi-structured interviews with market analysts, institutional investors, and finance directors to capture perspectives on how dividend policy shapes investor sentiment and share price behavior in Nigeria. This mixed-method approach provided both statistical rigor and contextual depth to the analysis.Findings from the regression analysis indicate that dividend payout ratio and dividend per share have a statistically significant positive effect on market valuation, suggesting that investors in Nigeria value regular and stable dividend distributions. Conversely, dividend yield showed a negative and insignificant relationship, implying that extremely high yields may be interpreted as a signal of distress or unsustainable earnings. The qualitative evidence reinforces these findings, with interviewees noting that dividend-paying firms are perceived as financially sound and better governed, thus attracting premium valuation from investors.The study concludes that dividend policy plays a critical signaling and valuation role in the Nigerian capital market. Consequently, corporate managers are encouraged to adopt consistent and transparent dividend policies to enhance firm value. Policymakers and market regulators are also advised to strengthen disclosure requirements and promote investor education to ensure that dividend signals are effectively transmitted and interpreted in the market.