Effect of Dividend Announcement on Share Prices of Listed Money Deposit Banks in Nigeria

Abstract

This study examined the effect of Dividend Announcement on the share Price of Listed Money Deposit Banks in Nigeria. This study used secondary sourced data, the data collected were analysed using the multiple regression analysis technique and presented using tables. The population of the study was twelve (12) money deposit banks that are listed in the Nigeria stock exchange and a sample of four (4) banks were considered. It was discovered that Dividend announcement has effect on share price of listed money deposit banks in Nigeria and EPS has no effect on share price of listed money deposit banks in Nigeria. We recommend that managers should act in the best interest of investor as to reduce the agency problem, thus complete information about the dividend polices of the firm should be provided. It is argued that dividend announcements convey information to investors regarding the firm’s value prospects. Thus, stock prices tend to increase when an increase in dividend is announced but tend to decrease when a decrease or omission is announced and that strict adherence to interest of shareholders in choosing dividend policies that will maximize shareholders’ value by management. The decision taking authority in a company lies in the hands of managers. Shareholders as owners of the company are the principals and managers are their agents. Thus, there is principal-agent relationship between shareholders and managers therefore managers should and must act in the best interest of shareholders as consistent with shareholders’ wealth maximization objectives of the firm. This will ensure that project will enhance the growth of the firm should be undertaken while those that will not undertake.