EFFECTS OF DIVIDENDS POLICY ON THE MARKET PRICE OF SHARE (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

 EFFECTS OF DIVIDENDS POLICY ON THE MARKET PRICE OF SHARE (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

ABSTRACT

The efficient and effective financial administration in corporate organization is sine quad non’ to the achievement of the organizational objective. Dividend policy is said to be financial policy that is responsible for the determination of the market price of shares. But there are divergent views on the effect of dividend policy on the market price of shares. Dividend relevance and dividend irrelevance theories. The regression analysis performed on the secondary data collected, using market price of shares as dependent variable, dividend per share, retained earnings per share and earnings per share as independent variables, revealed that there is significant relationship between dividend policy and market price of shares. It was also revealed that dividend affect market price of share more than retained earnings. It was also concluded that the belief of the dividend irrelevance theorists is wrong in the real life situation where forces of demand and supply play a determining role. It was recommended that financial administrators study and educate the environment in the formulation of dividend policy. Hence, optimum dividend policy will be achieved which in tum increases the value of the business firm.

TABLE OF CONTENT

Chapter One: Introduction

1.1   Background of the Study

1.2   Objective of the Study

1.3   Statement of Problem

1.4   Research Questions

1.5   Research Hypotheses

l.6    Significance of the Study

1.7   Scope and Limitation of the Study

l.8    Plan of the Study

Chapter Two: Literature Review/Theoretical Framework

2.0   Introduction

2.1   Conceptual Framework

2.2   Theoretical Framework

2.2.1 Dividend Relevance

2.2.2 Dividend Irrelevance

2.2.3 Theories based on the in Formativeness of Dividend Payout

2.2.4 Dividend Announcement and the Market Price of Shares

2.3   Types of Dividend

Chapter Three: Research Methodology

3.0   Introduction

3.1   Data Collection

3.2   Sources and Nature of Data

3.3   Analytical Techniques and Instrument

3.4   Model Specification

3.5   Model Estimation Techniques

3.6   Re-Statement of Hypothesis

3.7   Limitations and Problem Encountered in the Research Work

Chapter Four: Method of Data Analysis

4.0   Data Analysis and Interpretation

4.1   Presentations and Interpretation of Result

4.2   Major Findings and Implications

4.3   Effect of Dividend Policy on First Bank of Nigeria

Chapter Five: Summary of Findings, Recommendation and Conclusion

5.0   Summary

5.1   Findings

5.2   Recommendation

5.3   Conclusion

Bibliography

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Efficient management of the flow of funds within a firm shows that the firm has a goal or an objective because judgment as to whether or not financial decision is efficient must be made in the light of some standard. The objectives of firms are multi­-dimensional; this may range from social, to economics and to finance.

The social objective holds the view that the firm should socially responsible. This is because the firm is not operating in a vacuum but within environment, internal and external environments of the firm. These social responsibilities include the supply of quality products at low prices to the customers, tarring of roads maintenance of sound industrial relations, giving a fair deal to employees and seeking their participation in management and contribution towards the social overheads through taxes and donations. However, the social welfare maximization objective is greeted with very may criticism. The economics objective has profit maximization objective as its own objective and holds the view that sole objective of any firm should be to maximize profit.

The objective though considering better than that of social school of thought, also witness several and serious criticisms. The finance is maximizing the, wealth of the shareholders or value of the firm. The objective of wealth maximization would cause financial managers to take decisions, which balance returns and risk in such a manners as to maximize the benefits, through dividends and enhancement of share price, to the shareholders.

Dividend policy is seen to be sine-qua-non to the value of a firm subject to the position maintained in the above paragraph. The shareholders see dividends as signals of the firm’s ability to generate future income, hence, it is used in the valuation of the firm. The management of the firm is expected to choose the capital structure that will be able to give optimum return to the firm.

Hence, dividend policy “… consist of rules by which the earning are distributed between retention and dividends to shareholder,” Oloyede (2000).

 EFFECTS OF DIVIDENDS POLICY ON THE MARKET PRICE OF SHARE (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)