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Abstract
Dividend policy is one of the most controversial and complex area of corporate finance. Despite the fact that dividend policy is more commonly an instrument of wealth distribution than an instrument of wealth creation. Dividend policy remained an unresolved issue in corporate of finance and the findings are inconclusive. The objective of this paper is to critically examine the relationship between the firm's financial performance and dividend payout among listed manufacturing firms in Nigeria for the period 2007 - 2014. Data were to be collected using the secondary source of data only. The technique to be employed is multiple regressions as tool of analysis for the paper. Firm performance is measured by return on asset, return on equity, economic value added, and Tobin's Q and dividend policy is proxy by dividend payout.
Key words: Dividend payout, Firm performance, and Liquidity
1. Introduction
The issue of dividend policy is a very important one in the current business environment. Dividend policy remains one of the most important financial policies not only from the viewpoint of the company, but also from that of the shareholders, the consumers, employees, regulatory bodies and the Government. Dividend policy is a pivotal policy around which other financial policies rotate (Alii , 1993).
Dividends are commonly defined as the distribution of earnings (past or present) in real assets among the shareholders of the firm in proportion to their ownership. It is basically the benefit of shareholders in return for their risk and investment and is determined by different factors in an organization. Basically, these factors include financing limitations, investment chances and choices, firm size, pressure from shareholders and regulatory regimes.
Dividend policy connotes to the payout policy, which managers pursue in deciding the size and pattern of cash distribution to shareholders over time. Managements' primary goal is shareholders' wealth maximization, which translates into maximizing the value of the company as measured by the price of the company's common stock.
Dividend or profit allocation decision is one of the four decision areas in finance. Dividend decisions are important because they determine what funds flow to investors and what funds are retained by the firm for investment (Ross, Westerfield & Jaffe, 2002). More so, they provide information to stakeholders concerning the company's...