DIVIDEND POLICY DETERMINANTS: LIKELIHOOD AND PAYOUT MAGNITUDE IN NIGERIA'S CONSUMER GOODS FIRMS

Abstract

This study investigates the determinants of dividend policy in Nigeria's consumer goods sector, focusing on both the likelihood and magnitude of dividend payments. Employing a sample of 248 firm-year observations from 2013 to 2022, the study uses logistic regression to model the probability of dividend payments and Tobit regression to analyse payout magnitude. Firm-specific factors, including profitability (ROA), institutional ownership, managerial ownership, leverage, firm size, market valuation (Tobin's Q), and free cash flow, were evaluated to understand their impact on dividend decisions. Historical dividend patterns were also examined through lagged dividend payouts. The results reveal that profitability (ROA) and firm size (SIZE) are the most significant and consistent determinants of dividend behaviour, positively influencing both the likelihood and magnitude of payouts. Firms with higher profitability and larger size are more likely to pay dividends and distribute larger amounts. Short-term leverage (SHTLEV) significantly constrains dividend payments, while long-term leverage (LNGLEV), institutional ownership, managerial ownership, and free cash flow exhibit weaker or non-significant effects. Lagged dividend payouts show a positive and persistent influence, highlighting the importance of historical patterns in shaping current dividend decisions. These findings contribute to the literature on dividend policy by addressing gaps in emerging markets, particularly in Nigeria, where governance structures and financial constraints differ from developed economies. The study's methodological approach, combining logistic and Tobit regression, offers nuanced insights for managers, investors, and policymakers. It underscores the relevance of firm-specific factors in dividend decisions and provides actionable recommendations for enhancing corporate financial strategies in emerging markets.

Keywords: Dividend policy, profitability, firm size, leverage, free cash flow, institutional ownership, Tobit regression, logistic regression