The primary purpose of set uping a company is profit maximization irrespective of the sector it belongs, be it oil, fabricating banking or service sector with the exclusion of non-profit-making doing companies. Net income devising enhances the maximization of stockholders ‘ wealth, and future growing and development of the company. However, net income made are either shared between retained net incomes and divided or devoted entirely to any them. This now brings us to split policy as a tool in fiscal direction. The dividend payout policy is a spot controversial, that is, there are grounds for paying dividend every bit good as grounds for non paying it.
Dividend policy determination is concerned with the finding of the corporate net incomes generated through the successful operation of the company which is to be distributed amongst the key participants that guarantee the realisation of the successful result or operation of the organisation and the sum of these net incomes to be used. ( Omogoriola, 1999 ) .
Harmonizing to Olowe ( 1997 ) , the dividend policy determination is the 3rd major determination of a house. Dividends are distributions made out of a company ‘s net incomes after the duties of all fixed income holders have been met to the stockholders. The house considers the per centum of net incomes it pays in hard currency to its stockholders. In corporate finance, dividend policy is widely considered as a scheme in the concern universe as to corporate public presentation and growing ( Olowe 1997 )
In pattern, dividend policy straight influences the behavioural form of the investor that is, stockholders really buy portions in a company with dividend outlook due to the dividend policy determination of that company, these has an deduction on the behavioural form of the stockholders but the jurisprudence of province allows Directors to make up one’s mind whether to declare dividend or to capitalise net incomes or retain them as modesty. A batch of contentions sing revenue enhancements and dividend policy have attracted many academic involvements. Fiscal theoreticians such as Brennan ( 1970 ) , Masulis & A ; Trueman ( 1988 ) have stipulated that revenue enhancements affect organisational corporate dividend policy. If this guess were true, alterations in corporate dividend payout would be expected whenever the authorities changes its income revenue enhancement policy ( Wu, 1996 ) .
However, this does non ever use particularly in the banking concern. Linter ( 1956 ) had asserted that the major determiners of dividend policy are the awaited degree of future net incomes and the form of past dividend.
The term dividend is normally refers to a hard currency distribution of net incomes to the stockholders as they increase their wealth ; hence the aim in taking a dividend policy should be to maximise the value to the house to its stockholders.
TYPES OF DIVIDEND
Regular Dividend: These are dividends the company expects to maintain sporadically that are quarterly, monthly, semi yearly or yearly.
Excess Dividend: are those that may non be repeated
Particular Dividend: are those that are improbable to be repeated
Stock Dividend: are those paid in portions or stocks, a spot similar to stock splits, both increase the figure of portion outstanding and cut down the stock monetary value.
Retained gaining on the other custodies is the most important beginnings of financing a house ‘s investing. The intent of maintained net incomes is to re-invest, in order to increase future net incomes and dividends.
A house must make up one’s mind each period whether to retain its earning or distribute parts or all of them to stockholders. To see dividend policy, rating of the dividend determinations will broaden the maximization of value to the stockholders.
It is hence a serious issue in corporate dividend policy determination non merely to investor but besides to the Director who are pull offing the house.
This research work, therefore intends to look at the impact of dividend policy on corporate public presentation in the banking sector in the Nigeria Economy.
1.2. HISTORICAL BACKGROUND OF THE CASE STUDY
A brief background of quoted banking industries under consideration will be looked into and as such be used as a parametric quantity for infering the decision for this survey.
As one of the state ‘s biggest fiscal establishment, Zenith Bank has the biggest entire plus and contingents which stood at N1.178.39 billion as at June 2007 every bit good as market capitalisation of about N612.82 billion as at the terminal of the 2007 fiscal twelvemonth. It started its operation as a commercial bank in Nigeria in July 1990.
After a successful operation, the bank was listed in the Nigeria Stock Exchange with a immense success of approximately 554 % in its Initial Public Offer ( IPO ) .
UNION BANK OF NIGERIA PLC
As a non authorities owned bank in Nigeria, the UBN was established in 1917 and all its activities were taken over in 1925 by the Barclays Bank Dominion colonial and overseas. In its enormous attempt, all other subdivisions were established to convey it to about 59, lawfully owned and controlled by the Barclays International, though subsequently renamed as Barclays Nigeria Limited.
The ownership of the Barclays Bank remained unchanged until in 1971 when 8.33 % of the bank portions were offered to the Nigeria populace and was listed on the Nigeria Stock Exchange. The announcement of the Nigerian Enterprises Promotion Decree made it a nationalized bank when the Nigeria Government acquired about 51.67 % of the bank portions, and Barclays Bank International, London was left with 40 % .
A alteration of name occurred when Barclays Bank sold all its portions to the Nigerians, thereby resulted in the bank altering its name from Barclays Bank Nigeria to Union Bank of Nigeria reflecting a complete alteration of ownership.
UNITED BANK FOR AFRICAN PLC
In 1949, the British and Gallic Bank Limited started its banking operation in Nigeria which was subsequently renamed as the United Bank For African PLC.This bank was taken over in the early 60 ‘s by a squad of pool of five international Bankss including Banques Nationale de parties, bankers International Corporation, New York and Bank a Nazional del lowowo.The UBA is inarguably is one of the most efficient bank in Nigeria with its orbiter system operation linked to over 70 % of its subdivisions and has since been listed on the Nigerian Stock Exchange since 1971.The bank has grown progressively in the last 10 old ages in its entire assets and dividend payouts to the stockholders which stood at 58 kobo per portion soon.
The ownership and direction control of the bank is non wholly nationalized as the Nigerian citizens control 50 % , Standard Bank Nominees ( PTY ) Ltd with 40.70 % , Bankers International Corporation U.S.A. 4.50 % while Moute Dei Paschi di Sene, Italy and Bank Naziunule, del leraro, Italy control
2.40 % severally.
1.3 STATEMENT OF THE PROBLEM
Dividend policy is an of import facet of corporate finance every bit good as a controversial issue in the direction of corporate net incomes.
The direction is faced with the job and end of maximising the stockholders returns and value of their investing. This can be achieved by doing an optimum dividend policy.
The inquiry that arises now is what is the optimum dividend policy to be adopted by a company?
There exist two conflicting theories of dividend policy.
I. Dividend irrelevance school of idea
two. Dividend relevant school of idea
The dividend irrelevant school of idea was championed by Modigliani and Miller ( M & A ; M ) old ages 1961, who believed that dividend policy of a house is non relevant as its does non impact the market capitalisation of the house, that is, the value of the house, while the divided relevancy school of idea was title-holder by Professor E. Walter and M. Gordon, who both believe in the relevance of dividend policy in the value of the house.
These theories have great influence on the dividend policy determinations of many companies in pattern. Some companies believe that stockholders prefer dividends to capital additions while others believe that stockholders prefer capital additions to dividends.
This research work is intended to profer solutions to the identified jobs normally associated with dividend policy determinations in order to get at an optimum dividend policy to be adopted by companies.
1.4 STATEMENT OF RESEARCH QUESTIONS
Does dividend wage out have any consequence on market value of portions?
Is there any relationship between dividend wage out and net incomes made?
What are the penchants of stockholders: Dividend income or capital additions?
Should the company follow a stable dividend policy
What are the factors that restrict payment of dividends?
1.5. Aim OF THE STUDY
Amongst the aims of the survey includes:
( I ) To place the legal and economic restraints impacting dividend policy.
( two ) To analyze the relationship between dividend policy and corporate public presentation in the selected Bankss.
( three ) To find the penchants of assorted stockholders in the selected Bankss
( four ) The survey aimed to find the optimum dividend policy determination
STATEMENT OF HYPOTHESES
To research will prove the undermentioned hypotheses as portion of his attempts to accomplish the aims research.
1. Holmium: Dividend per portion does non significantly affect market monetary value per portion.
Hello: Dividend per portion affects market monetary value per portion
2. Holmium: There is no important relationship between dividend wage out and net incomes
Hello: There is a relationship between dividend wage out and net incomes
3. Holmium: Increase net incomes per portion have no important relationship with dividend per portion.
Hello: Addition in net incomes per portion has important relationship with dividend per portion
Significance OF THE STUDY
The significance of this research work is to assist the direction of public companies to do optimum determinations as respects dividend policy, particularly the managers of the company who have the exclusive duty in declaring dividends.
It has been noticed in pattern that many investors have different grounds to retain their fiscal involvement in a company. Traveling by this, it is of import for the company to happen out what will actuate a bulk of investors to retain their investing, instead fiscal involvement in the company with a position to explicating an optimum dividend policy. .
This research work will non merely assist the managers in make up one’s minding the type of dividend policy to follow. It will besides be of huge importance to both the stockholders and meaning investors by giving them an penetration into the restraint on dividend policies in pattern. This research work will besides be utile to meaning research workers transporting out similar research work.
1.8 SCOPE AND LIMITATION OF THE STUDY
This research work intends to measure the impact of dividend policy on corporate public presentation in the banking sector as it maximizes the stockholders returns ; with a position to happening out whether or non dividend declaration and payout affects portion monetary values. The schools of idea on dividend relevancy and irrelevancy shall be covered in this survey.
The restraint on dividend payout and the assorted signifiers of dividend policy will be analyzed every bit good. My focal point will be on some selected quoted banking industries owing to the clip restraint and high cost that will be associated with an extended survey.
The information to be used in this survey are restricted to the fact obtained from each company ‘s published one-year studies and stock exchanged day-to-day official list.
This survey will do usage of informations between five and ten old ages period.
1.9 DEFINITIONS OF TERMS
Dividend: Dividends are payments made to stock holders from a house ‘s net incomes, whether those net incomes were generated in the current period or in old period.
Dividend Output: This shows the current on investing. It is determined by spliting dividends per portion by market monetary value per portion
Gaining Per Share: This is net income attributable to each equity portion, based on the net income for the period after subtracting minority involvements and penchant dividends, but before taking into history excess ordinary points, divided by the figure of ordinary portions in issue and ranking for dividend in regard of that period.
Quoted Company: This is a public limited liability company whose portions are listed on the Nigeria Stock Exchange.
Changeless Payout: It is the payment of fixed per centum of cyberspace gaining every old ages as dividend.
Stockholders: These are the legal proprietors of the company ; they are the suppliers of capital for the funding of a company.
Changeless Dividend per Share/Dividend Rate: It is the payment of fixed sum per portion of fixed rate on paid-up capital as dividend every twelvemonth irrespective of the fluctuations in the earning.
Auxiliary: It is a company whose direction is controlled by another company known as the parent or keeping company.
Retained Earning: This is portion of net incomes non distributed to stockholders, it provides financess to finance the house ‘s long-run growing. It is the most important beginning of financing a signifier ‘s investing in pattern.
Dividend Policy: This is the determination which determines the distribution of hard currency flows generated from successful trading between dividend payment and maintained net incomes.
Dividend per Share: This is the ratio that shows dividend and keeping policy of the company. It is the attributable earning less preffered dividend and maintained net incomes divided by the figure of common ordinary portions is usage.
Market monetary value per portion: It is the entire market value of portions divided by the figure of ordinary portions or the monetary value of a company ‘s portions as listed on the stock exchange day-to-day usher.
Stock Dividend Script Dividend: This is a distribution of portion alternatively of hard currency dividends to bing stockholders. It is besides called fillip or book issues.
Capital Addition: It is the returns that are accrued to portion holders in topographic point of dividends. This is achieved by retaining net incomes for re-investment and dividend growing in future.
Dividend Payout Ratio: it is the per centum of net incomes that is paid out to stockholders. It is dividend by net incomes.
Associated Company: This is a company ( other than a subordinate ) in which another company has between 20 % and 50 % stockholders and has a significant influence on its direction