INFLUENCE OF DIVIDEND POLICY ON SHAREHOLDER'S WEALTH IN NIGERIAN BANKS

Abstract

This study examines the effect of dividend policy on shareholder wealth in Nigerian banks. Specifically, it investigates the impact of the Dividend Payout Ratio (DPR), Dividend Yield (DY), Dividend Stability (DS), and Dividend Growth Rate (DGR) on shareholder wealth. An ex post facto research design was adopted, utilizing historical financial data from two major Nigerian banks: United Bank for Africa (UBA) and Access Bank. These banks were purposively selected due to their market significance and consistent dividend payment history. Additionally, primary data was collected through a structured questionnaire. Multiple linear regression analysis was employed to assess the relationship between dividend policy variables and shareholder wealth. The findings indicate that the Dividend Payout Ratio (DPR) has a significant positive effect on shareholder wealth, suggesting that a higher DPR enhances investor returns. However, Dividend Yield (DY), Dividend Stability (DS), and Dividend Growth Rate (DGR) do not significantly impact shareholder wealth. This implies that Nigerian investors may prioritize actual dividend payments over stability or growth when making investment decisions. The study concludes that a well-structured dividend payout strategy is essential for maximizing shareholder wealth in Nigerian banks. The research contributes to knowledge by highlighting the importance of payout decisions in financial management and investment strategies. It is recommended that Nigerian banks maintain a balanced and transparent dividend policy to enhance investor confidence. Additionally, financial managers should ensure clear communication regarding dividend policies while considering alternative strategies such as reinvesting retained earnings to create long-term value. Educating investors on dividend policies through financial literacy initiatives is also suggested to promote informed investment decisions.