Effect of Financial Leverage on Dividend Policy of Quoted Conglomerates in Nigeria

Proceedings of Faculty of Management Sciences' 2016 International Conference

15 Pages Posted: 28 Jul 2017 Last revised: 10 Sep 2017

See all articles by Nestor Amahalu

Nestor Amahalu

Nnamdi Azikiwe University - Department of Accountancy

Obi Chinyere

University of Nigeria Enugu Campus

Chike Nweze

Nnamdi Azikiwe University - Department of Accountancy

Emmanuel Ikechukwu Okoye

Nnamdi Azikiwe University - Department of Accountancy

Date Written: November 10, 2016

Abstract

This study assessed the effect of financial leverage on dividend policy on conglomerates listed on the floor of the Nigerian Stock Exchange (NSE) from 2010 to 31st December, 2015. Six (6) quoted conglomerates were selected for this study. Panel data were employed in this study. The study made use of Ex-post facto research design in conducting the research. The study made use of secondary data obtained from fact books and annual report and accounts of the selected quoted conglomerates in Nigeria as at 31st December 2015. The relevant data obtained were subjected to statistical analysis using STATA 13 software. Pearson’s coefficient of correlation and Multiple Regression Analysis were the statistical tools used in this study. In order to verify the quality of the data used, Variance Inflation Factor (VIF) was employed to test for multicollinearity among the variables. In addition, the robust regression test was used to correct the problem of Heteroskedasticity among the variables in the model while Hausman test was used to determine the fixed effect and random effect of the variables used in this study. The results of this study revealed that financial leverage (proxied by short term debt, long term debt and total debt) has statistically significant effect on dividend policy of quoted conglomerates in Nigeria at 5% significance level. The study recommends that debt financing in the financial mix of the conglomerates should be done at an optimal level so as to ensure proper utilization of the firms’ assets.

Keywords: Financial Leverage, Dividend Policy, Total Debt, Earnings before Interest and Tax

JEL Classification: M18, M24, M29, M44

Suggested Citation

Amahalu, Nestor and Obi, Juliet and Nweze, Chike and Okoye, Emmanuel Ikechukwu, Effect of Financial Leverage on Dividend Policy of Quoted Conglomerates in Nigeria (November 10, 2016). Proceedings of Faculty of Management Sciences' 2016 International Conference. Available at SSRN: https://ssrn.com/abstract=3008604

Nestor Amahalu (Contact Author)

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria
+2348063393668 (Phone)

Juliet Obi

University of Nigeria Enugu Campus ( email )

Department of Accountancy
Box 15540, Enugu
Enugu, NC Enugu 234
Nigeria

Chike Nweze

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria

Emmanuel Ikechukwu Okoye

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria

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