Effect of Dividend Policy on Bank Performance in Nigeria

Abstract

This investigation analyzed the effect of the dividend policy on bank performance in Nigeria using secondary source of data which was sourced from one of the leading banks in Nigeria (WEMA Bank PLC). The data was gathered from various audited publications of the bank financial statement. The data was analyzed with different estimation techniques ranging from unit root testing of the ADF which was used to capture the stationarity of the variables, regression analysis was employed to capture the impact of the independent variables as against the dependent variable, and ARDL cointegration was used to capture the long-run relationship. The findings from the analysis found that return on equity and return on asset were stationary after first difference while dividend yield and dividend payout ratio were stationary at level. The bound test reported that the null hypothesis that no long-run relationships exist between the variables, failed to be rejected since the t-statistic value is lower than the critical bound values at 10%, 5%, and 1% respectively. The study concluded that dividend yield (DY) contributes negatively and insignificantly to influence return on asset (ROA) while dividend payout ratio contributes positively and significantly to influence ROA. Meanwhile, no long-run relationship exists between the variables. It was also concluded that dividend yield contributes negatively and insignificantly to influence return on equity and dividend payout ratio was positive but insignificant to influence return on equity and there is no long-run relationship between the variables.