EFFECT OF DIVIDEND POLICY ON STOCK MARKET PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The study investigated with the effect of dividend policy on stock market performance of listed deposit
money banks in Nigeria. The study employed an ex-post facto research design. The research population
comprises of twelve commercial banks listed on the Nigerian Exchange Group's trading platform as of
December 31, 2022. The timeframe from 2013 to 2022, covering the financial years of the ten companies,
was selected as the designated period for the research's focus. The data for this study are gotten from
annual reports of the selected banks. The results indicate that DPS is significantly associated with MPS,
demonstrating a positive relationship. Similarly, DPO and RER were found to have significant positive
effects on MPS, suggesting that higher dividend payouts and retained earnings ratios contribute to better
stock market performance. Bank size (BS), used as a control variable, also showed a significantly positive
effect on MPS, indicating that larger banks tend to perform better in the stock market. However, the study
found that dividend yield (DY) did not show any significant relationship with MPS. This suggests that
while other dividend policy variables play a crucial role in influencing stock market performance, the
dividend yield alone does not have a direct impact on the market price of shares for the listed commercial
banks in Nigeria. The study recommended that the higher the profitability and operating cash flow of a
firm, the higher the dividend payout ratio, leading to higher stock prices. Management should focus on
enhancing the company's profitability and operating cash flow. This can be achieved through strategic
investments, cost optimization, and efficient operations. By improving these financial metrics, the
company can afford to increase its dividend payout ratio.