Effect of Financial Leverage on Dividend Policy of Quoted Conglomerates (2010-2015)

Chapter 10 in Managing Diversification for Sustainable Development in Sub-Saharan Africa: Proceedings of 2016 International Conference of the Faculty of Management Sciences, Nnamdi Azikiwe University, Awka, 8th-10th November, 2016

13 Pages Posted: 20 Sep 2017

See all articles by Emmanuel Ikechukwu Okoye

Emmanuel Ikechukwu Okoye

Nnamdi Azikiwe University - Department of Accountancy

Nestor Amahalu

Nnamdi Azikiwe University - Department of Accountancy

Chike Nweze

Nnamdi Azikiwe University - Department of Accountancy

Obi Chinyere

University of Nigeria Enugu Campus

Date Written: November 8, 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. Nine quoted conglomerates were selected for this study. Panel Data was employed in this study. The researchers 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 consumer goods firms in Nigeria as at 31st December 2015. The relevant data obtained were subjected to statistical analysis using STATA 13. 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 (proxy 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 researchers recommend that debt financing in the financial mix of the consumer goods firms 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: M41

Suggested Citation

Okoye, Emmanuel Ikechukwu and Amahalu, Nestor and Nweze, Chike and Obi, Juliet, Effect of Financial Leverage on Dividend Policy of Quoted Conglomerates (2010-2015) (November 8, 2016). Chapter 10 in Managing Diversification for Sustainable Development in Sub-Saharan Africa: Proceedings of 2016 International Conference of the Faculty of Management Sciences, Nnamdi Azikiwe University, Awka, 8th-10th November, 2016. Available at SSRN: https://ssrn.com/abstract=3039388

Emmanuel Ikechukwu Okoye (Contact Author)

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria

Nestor Amahalu

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria
+2348063393668 (Phone)

Chike Nweze

Nnamdi Azikiwe University - Department of Accountancy ( email )

Awka, Anambra 23400
Nigeria

Juliet Obi

University of Nigeria Enugu Campus ( email )

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

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