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
Date Written: November 8, 2016
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: Suggested Citation