Dividend Policy and Stock Price Volatility of Quoted Firms in Nigeria (2005-2014)

Iwamitigha, Ayodeji Moses (2016)



The study examined the pattern of Share Price changes of Nigerian quoted financial firms from 2005-2014. It also investigated the effect of dividend policy on Share Price volatility, and explored the relationship between retained earnings and Share prices of Nigerian quoted financial firm from 2005-2014. These were with a view of providing information on the effect of dividend policy on share performance of financial firms in Nigeria. The study employed secondary data. Data were obtained from the audited financial statements of selected quoted companies and the Nigerian Stock Exchange (NSE) Factbooks, from 2005 to 2014. The population for this study comprised all the 21 banks and 34 insurance companies listed on the Nigerian Stock Exchange. A total of 35 quoted financial companies, which include 19 banks and 16 insurance firms which participated in the recapitalisation exercise during the period of the study was purposively selected. Data collected were analysed using graph, percentages and Fixed Effect Method. The result revealed that share price volatility in the financial sector exhibited a cyclic nature as it oscillated within the band of 0.67% and 22.83% during the study period. In 2005, volatility of financial stocks grew by 22.83%, which implied that stocks of the firms were largely volatile. The result also revealed that dividend yield had negative relationship with stock volatility (t=-2.3878, p<0.05), while Dividend Payout Ratio exhibited a positive relationship (t=2.5144, p<0.05). Furthermore, the study found that Retention Ratio (t=-2.9109, p<0.05) negatively influenced stock price volatility of financial firms. The study concluded that dividend policy had positive effect on the share prices of quoted financial companies in Nigeria, and can be used as a tool to enhance share performance.