Abstract:
The purpose of this study was to examine the relationship between dividend policy and financial performance of deposit money banks in Nigeria. To achieve this, a review of extant theoretical and empirical literature was made and the study is anchored on the signaling theory. The longitudinal survey research design was adopted in this study and data were obtained from the Financial Statements and Annual Reports of eighteen (18) Deposit Money Banks in Nigeria for the period of 2015 – 2019. The data generated for this study were analysed with both descriptive and inferential statistics using the arithmetic mean, standard deviation, minimum and maximum values, and the Auto-Regressive Distributed Lag (ARDL) regression technique. These were computed with the aid of E-Views version 10. The findings of the study revealed that the effect of dividend policy on financial performance of deposit money banks in Nigeria is mixed. While dividend pay-out ratio has a negative significant relationship with financial performance (return on equity), dividend yield does not significantly affect financial performance (return on equity)of deposit money banks in Nigeria. Based on the above findings and the conclusion drawn there from the following recommendations are made: management of deposit money banks should have a good and robust dividend policy in place to determine the percentage of dividend pay-out that would enhance financial performance in term of return on equity; management of deposit money banks should invest more effort to increase dividend yield and improve its impact on financial performance (return on equity) of deposit money banks in Nigeria.
