CAPITAL STRUCTURE AND DIVIDEND POLICY OF LISTED INDUSTRIAL GOODS COMPANIES IN NIGERIA: MEDIATING EFFECT OF PROFITABILITY

Abstract

The main objective of this study is to determine the mediating effect of profitability on the
relationship between capital structure and dividend policy of listed industrial goods companies
in Nigeria. Correlational research design was used and data were extracted from the annual
reports and accounts of the twelve (12) sampled industrial goods companies listed on the
Nigerian stock exchange for the period of 10  years (2011–2020). The data were analyzed
using OLS regression analysis. Robustness tests namely Multicollinearity, Heteroscedacity and
Hausman specification were conducted to validate the results. The findings revealed that
operating profit margin has a positive and significant influence on dividend payout ratio of listed
industrial goods companies in Nigeria. However, profitability did not significantly mediate the
relationship between capital structure and dividend policy of the listed industrial goods
companies in Nigeria but the need to maintain going concern cannot be overemphasized. The
study concludes that the need for profitability cannot be underestimated in consideration of the
fact that without profit, dividend may not be paid and will be difficult to maintain going
concerned. The study therefore recommends that, in order to improve dividend payout ratio,
management should reduce the use of debt in the capital structure since debt covenant are
detrimental to dividend payout ratio.