ABSTRACT

This study examined the impact of dividend policy on shareholders’ wealth using a panel data of some quoted Banks in Nigeria for a period ranging from 2010 - 2014.

The Fixed Effect Model was employed on the panel data in order to study the impact of dividend policy on shareholders’ wealth in Nigeria. Data were collected from the Annual Reports of the Banks used for the various years under study.

 From the empirical result, a positive and robust significant relationship was found to exist between Dividend Per Share (DPS) and Shareholders’ wealth with a t-statistics value of (2.940719). A positive significant relationship was also found to exist between Retained Earnings (RE) and Shareholders’ wealth with a t-statistics of (7.621971). However, Earnings Per Share (EPS) was found to exert a robust negative significant relationship with shareholders’ wealth with a t-statistics value of (-3.528975).

This study concluded that the dividend policy of a firm has an impact on its shareholders’ wealth as supported by the Dividend Relevance theory which explains that dividend policy has significant effect on shareholders’ wealth as well as firms’ value.

This study therefore, recommends that firms should operate a dividend policy that tends to satisfy the need of shareholders as well as the investment need of the firm. Thus, a portion of the earnings of a firm should be paid as dividend while a portion is also retained for further investments.

Keywords: Dividend Per Share, Shareholders’ Wealth, Earning Per Share, Fixed Effect Model.