Corporate Governance Mechanisms and Dividend Policy: Evidence from Quoted Deposit Money Banks in Nigeria
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Date
2018-12
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Department of Accounting & Finance and Business Administration, Fountain University, Osogbo
Abstract
Decline in dividend payments and weak corporate governance in Nigerian deposit money banks
spur the need for this study. Therefore, the study investigates how corporate governance
mechanisms such as executive compensation, debt financing, block ownership and directors’
ownership influence the dividend policy of these banks between 2006- 2016. The secondary data
used for this study was extracted from the annual reports of the banks and different editions of the
NSE fact book. Two-Step System Generalized Method of Moments (GMM) estimator was employed
for analyses. Findings revealed that executive compensation, lagged dividend and size
significantly affect dividend payment of deposit money banks while other mechanisms like debt
financing, block ownership and directors’ ownership were insignificant in explaining dividend
payment in Nigeria banks. The study concludes that executive compensation affects firm’s ability
to reward shareholders in form of dividend payment in Nigerian deposit money banks. Thus, this
study recommends that regulatory bodies like CBN, NDIC should ensure that the compensation
paid to the bank executives is regularised so that the interest of investors will not be undermined.
In addition, the compensation of the bank executives should be performance based, this will
improve their performance and promote higher dividend payment to investors.
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Keywords
Corporate Governance, Dividend Policy, Deposit Money Banks (DMBs)