MODERATING EFFECTS OF FIRMS AGE ON DIVIDEND POLICY AND SHAPE PRICE OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Dividend policy is one of the most delicate decisions that Managers of Corporate organisations are confronted with because of the wide spectrum of stakeholders to be affected as they are held inbetween the need to retain part or all of the profit for reinvestment and dividend payment to Shareholders. Given the importance of the perception of investors on Dividend policy concerning Share Price, this study evaluates the effect of dividend policy on the share price of deposit money banks in Nigeria with firm age as a moderating variable. The Independent variable (Dividend Policy) is proxied by the dividend payout ratio and retained earnings ratio, while the market share price is the dependent variable. The population of the study is the same as the sample size comprising the Ten (10) quoted Nigerian banks. The panel data were sourced from the Annual Reports of the banks from 2011-2020. The analysis was conducted with the aid of Robust Regression adopting a two-model approach. The results of Model I reveal that the dividend payout ratio has a significant positive effect on share price, while retained earnings ratio has an insignificant negative effect on the market share price. The Model II results reveal that firm age plays no significant moderating role on the effect of dividend payout ratio on market share price, while, Firm age plays a significant moderating role on the effect of retained earnings ratio on the market share price of the sampled banks during the period studied. The study recommends a higher Dividend Payout Ratio and lower Retained Earnings Ratio for higher Share valuation.