DIVIDEND POLICY AND FIRM VALUE OF DEPOSIT MONEY BANKS IN NIGERIA: THE MODERATING ROLE OF PROFITABILITY

Abstract

Firm value reflects investors’ perception of the worth of a company for informed business decisions Evidence from literature showed that factors like financial leverage, capital structure and economic uncertainties have led to the fluctuating and declining firm value which have negative effect on business decisions in listed deposit money banks . Research has shown that not many listed deposit money banks have integrated dividend policy into their operations. This paper examined the effect of dividend policy on firm value of Deposit Money Banks in Nigeria, an emerging country. Furthermore, it assessed the moderating effect of profitability considering the dividend irrelevance theory. Data were collected from 8 listed banks over 2013 – 2022. The dependent variable, firm value was proxied using Tobin q, independent variable measured as dividend per share and dividend payout while moderating variable profitability was estimated using Return on equity. Using a fixed effect panel regression techniques to investigate the proposed relationships, the baseline model demonstrated that both dividend per share had an and dividend payout had a significant and positive effect on firm value. More so, the outcome of the moderating evaluation indicated that profitability exerted a moderating effect on the relationship between dividend policy and firm value. Specifically, profitability weakened the association between dividend policy and firm value for DMBs in Nigeria. Therefore the study recommended that management should prioritize shareholder dividend payments without compromising effective exploitation of all available investment opportunities to sustain profitability.