DIVIDEND POLICY AND MARKET VALUE OF COMPANIES IN THE ALTERNATE SECURITIES MARKET SECTOR OF NIGERIA
ABSTRACT
This study is motivated by a desire to examine dividend policy and market value of companies in the alternate securities market sector of Nigeria. In light of the empirical review and other discussions, a number of questions arose as to whether cash dividend, share dividend, earnings per share and market of value of companies in the alternate security market sector of Nigeria. Using the Ordinary Least Square (OLS) regression technique with the aid of a computer software E-view 7.0, the empirical findings revealed among other things that, there is a significant relationship between earnings per share, retained earnings per share and market value, while there is no significant relationship between stock dividend per share and market value. We recommend among other things that, the management of the various companies should formulate and implement policies which will likely to stimulate earnings per share, cash dividend per share, stock dividend per share, retained earnings per share and other performance measure in the right direction which would positively influence the market value of their company.
TABLE OF CONTENTS
    CHAPTER ONE: INTRODUCTION
Background to the Study                    
Statement of the Problem                     
Objective of the Study                         
Research Hypotheses                     
Scope of the Study                    
Significance of the Study                     
Limitations of the Study                        
Definition of Terms                         
References                                
CHAPTER TWO: LITERATURE REVIEW
Introduction                         
Theoretical Issues                     
Determinants of Dividend Policy                 
Dividend Policy Behaviour                     
Effects of Dividend Policy on Share Prices              
Cash Dividend and Market Value                 
Share Dividend and Market Value                 
Earnings and Market Value                 
References                                
CHAPTER THREE: RESEARCH METHODOLOGY
Introduction                         
Research Design                         
Population of the Study                     
The Sample Size                        
Sampling Techniques                     
Sources of Data                         
Measurement of Variables                 
Model Specification                     
Method of Data Analysis                    
References                         
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF RESULT
Introduction                        
Analysis of Data                        
Regression Analysis                    
OLS Regression Analysis                    
Hypotheses Testing                    
Discussion of Findings                    
CHAPTER FIVE:    SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Introduction                            
Summary of Findings                        
Conclusion                              
Recommendations                    
Bibliography                         
Appendix                             
CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
The issue of dividend policy is a very important one in the current business environment. Dividend policy remains one of the most important financial policies not only from the viewpoint of the company, but also from that of the shareholders, the consumers, employees, regulatory bodies and the Government. For a company, it is a pivotal policy around which other financial policies rotate (Alii, Khan, & Ramirez, 1993).
Dividend or profit allocation decision is one of the four decision areas in finance. Dividend decisions are important because they determine what funds flow to investors and what funds are retained by the firm for investment (Ross, Westerfield, & Jaffe, 2002). More so, they provide information to stakeholders concerning the company’s performance. Firm investments determine future earnings and future potential dividends, and influence the cost of capital (Foong, Zakaria, & Tan, 2007).
The survival of any company is dependent on the continuous investment in facilities and the employment of internal financing, through the use of retained earnings from an integral part of the sources of finance to foot the investment needs (Bajaj & Vijh 1990; Osaze & Anao, 1990). Government fiscal policies tend to put some restrictions on the amount of dividend a company may pay. This invariably has forced part of the realized profits to be ploughed back. This was very obvious during the indigenization exercise of the seventies. The restriction is further strengthened by section 379(2) of the Company and Allied Matters Act (CAMA) 1990, which provides that the general meeting shall have power to decrease the amount recommended. One of the reasons behind the dividend decision policy of the Nigerian government is to ensure that funds are available for continuous investment in assets, so that the companies will continue to operate on the going concern principle. The realization of the laudable goals of entrepreneurial investment in Nigeria has been inhibited by lack of sufficient funds. In fact the low level of investment capital available to most industrial organizations has accounted for the low capacity utilization.
The Manufacturers Association of Nigeria recently put this at below 30% (Nigeriabusinesslnfo.com). As one of the responses to the agony of capital shortage in the industrial sector, government initiated the deregulation of the capital market. The excess was to foster a developed capital market. However, irrespective of the various laudable efforts by the government, the Nigerian capital market is still at its emerging state.
STATEMENT OF THE PROBLEM
Despite the numerous studies (Arnott & Asness 2003; Farsio, Geary, & Moser, 2004 and Nissim & Ziv 2001) that have been done, dividend policy remains an unresolved issue in corporate finance. Several theories have been proposed to explain the relevance of dividend policy and whether it affects firm value, but there has not been a universal agreement (Stulz, 2000; Pandey, 2003; DeAngelo, DeAngelo & Stulz, 2006). Researchers Amidu (2007), Lie (2005), Zhou & Ruland (2006), Howatt et al. (2009), continue to come up with different findings about the relationship between dividend payout and firm performance. A study by Amidu (2007) revealed that dividend policy affects firm performance as measured by its profitability. The results showed a positive and significant relationship between return on assets, return on equity, growth in sales and dividend policy. Howatt (2009) also concluded that positive changes in dividends are associated with positive future changes in earnings per share. In contrast, Lie (2005) argues that there is limited evidence that dividend paying firms experience subsequent performance improvements.
A number of studies (Arnott & Asness 2003; and Nissim & Ziv 2001) have been done with regard to dividend policy and firm performance, especially in developed economies. Can the findings of those studies (Aivazian, Booth, & Clearly, 2001 and Al-Haddad, 2011) be replicated in emerging economies or infant capital markets? In Nigeria, few empirical studies have been done to establish the relationship between dividend policy and market value of companies. This study therefore comes in to fill the void by establishing whether there is a relationship between dividend policy and market value among listed companies in Nigeria; hence the following research questions are raised.
What is the relationship between cash dividend and market of value of companies in the alternate security market sector of Nigeria?
What is the relationship between share dividend and market of value of companies in the alternate security market sector of Nigeria?
What is the relationship between earnings per share and market of value of companies in the alternate security market sector of Nigeria?
What is the relationship between investment policy and market of value of companies in the alternate security market sector of Nigeria?
OBJECTIVE OF THE STUDY
The main objective of this study is to empirically examine dividend policy and market value of companies in the alternate securities market sector of Nigeria.
The specific objectives are:
To examine the relationship between cash dividend and market value of companies in the alternate security market sector of Nigeria.
To determine the relationship between share dividend and market value of companies in the alternate security market sector of Nigeria.
To examine the relationship between earnings per share and market value of companies in the alternate security market sector of Nigeria.
To ascertain the relationship between investment policy and market value of companies in the alternate security market sector of Nigeria.
RESEARCH HYPOTHESES
The following formulated hypotheses will be tested in the study:
There is a significant relationship between cash dividend and market of value of companies in the alternate security market sector of Nigeria.
There is a significant relationship between share dividend and market of value of companies in the alternate security market sector of Nigeria.
There is a significant relationship between earnings per share and market of value of companies in the alternate security market sector of Nigeria.
There is a significant relationship between investment policy and market of value of companies in the alternate security market sector of Nigeria.
SCOPE OF THE STUDY
The research study focuses on dividend policy and market value of companies in the alternate securities market sector of Nigeria.
The population of the study is the entire quoted companies in the alternate Nigeria Stock Exchange.
The sample size is five companies quoted in the Nigeria Stock Exchange for the periods 2002 to 2011.
Geographically, the study will be conducted in Benin City, Edo State.
SIGNIFICANCE OF THE STUDY
This research work on its conclusion, together with whatever solution or findings that may arise, will prove useful to some particular group of persons or otherwise for various reasons in accordance with their varying needs.
Beneficiaries
Corporate bodies: This study will be important and beneficial to stakeholders to know the essence of the dividend policy.
The Government: It will acquaint the government of the importance of dividend policy and how it should be properly managed.
Academic/future researcher: Both academic and other future researchers in this similar subject matter will find it a useful source of learning and research.
LIMITATIONS OF THE STUDY
In the course of conducting this research work, the researcher encountered some constraints. These constraints are:
Inadequate Study Materials: Research materials were of limited supply due to the practicality of the study. Where they were available; the cost involved in sourcing for them was very expensive.    
Lack of Access to Current Data: Most managements and staff of the establishment would not want to disclose important or relevant information about their organizations on this subject matter, except were such is permitted by law to be disclosed.  
Finance Cost: The cost involved in sourcing for the available materials and other necessary information was very high within the reach of the student researcher.
DEFINITION OF TERMS
Dividend:      
The variable return to equity shares decided by the Board of Directors of a company/corporation according to its policy on distributing its profit after taxes and all charges have been paid.
Dividend Policy:      
Dividend policy involves the decision to payout earnings or to retain them for re-investments in the company.  It involves a corporation’s choice of whether to pay its shareholders a cash dividend and, if so, how much to pay and with what frequency (annually, semi-annually or quarterly).
 REFERENCES
Aivazian, V., Booth, L., & Clearly, S. (2003). Do emerging market firms follow different dividend policies from U.S. firms? Journal of Financial Research, 26(3), 371 – 387.
Al-Haddad, W. (2011). The effect of dividend policy stability on the performance of banking sector. International Journal of Humanities and Social Science, 5(1).
Alii, K. L., Khan, A. Q. & Ramirez, G. G. (1993) “Determinants of corporate dividend policy: A factorial analysis”, Financial Review, vol. 28: 523-47
Arnott, D. R., & Asness, S. C. (2003). Surprise higher dividends is higher earnings growth. Financial Analyst Journal, 70 – 87.
Bajaj M. & Vijh, A. (1990) “Dividend Clienteles and the Information Content of Dividend Changes”, Journal of Financial Economics, vol.26: 183-219
DeAngelo, H., DeAngelo, L., & Stulz, R. (2006). Dividend Policy and the earned/contributed capital mix: a test of the life-cycle theory. Journal of Financial Economics, 81, 227-254.
Farsio, F., Geary, A., & Moser, J. (2004). The relationship between dividends and earnings. Journal for Economic Educators, 4(4), 1 – 5.
Foong, S.S., Zakaria, N.B. & Tan, H.B. (2007) “Firm Performance and Dividend-Related Factors: The Case of Malaysia”, Labuan Bulletin of International Business & Finance, vol. 5: 97-111