Corporate dividend policy in practice: the views of Nigerian financial managers

Abstract

Purpose – The purpose of this study is to provide an additional insight into the dividend puzzle by investigating the field practice of dividend policy in an emerging market such as Nigeria. It also aims to contribute to the literature on industry-related dividend effect by examining whether managerial views on dividend policy differ between financial and non-financial firms.

Design/methodology/approach – The study employs semi-structured interviews with the financial managers of 21 Nigerian listed firms. The interviewees were divided into two broad groups of financial versus non-financial firms based on the industry classification of the firms.

Findings – The findings suggest that, despite differences in institutional environment, the dividend setting process in Nigerian companies is similar in many extents to those in the US and other developed markets. Nigerian companies exhibit dividend conservatism and typically focus on current earnings, stability of earnings and availability of cash when determining their current dividend levels. However, unlike in prior studies, the interviewees suggest that their companies do not have a target payout ratio; instead, they target the dividend per share when determining the disbursement level. Nevertheless, views regarding these issues vary significantly between financial and non-financial firms.

Originality/value – This paper adds to the extant literature that has examined the behavioural aspects of dividend policy using interviews, especially in the context of less-developed markets such as Nigeria. The study also updates and extends prior evidence on an industry-related effect on managerial views on dividend policy.