Macroeconomic Aggregates and Retention Ratio of Quoted Firms in Nigeria
This study examined the effects of macroeconomic aggregate on retention ratio of selected quoted manufacturing firms in Nigeria for the period 1981 to 2014. The study used secondary data. The technique adopted is the Ordinary Least Squares, Error correction mechanism and Autoregressive Distributed Lag (ARDL) Bounds approach to cointegration. The dynamic short-run estimate revealed that interest rate exerts a negative influence on retention ratio. The study also found that oil price exerts a positive and significant impact on retention ratio. Further, it revealed that capital market development exerts a positive influence on retention ratio, but financial sector's development showed a positive relationship with retention ratio, inflation rate appeared with an expected negative sign. Foreign exchange rate showed a positive relationship with retention ratio; money supply exhibited a positive influence on retention ratio of quoted firms in Nigeria. The error correction coefficients were significant with the expected sign. A long run relationship among the variables was established. Thus, the study concludes that macroeconomic variables have a significant influence on dividend policy. We recommend the need for firms to consider the operating macroeconomic framework in formulating dividend policy.
Al-Abedallat, A.Z., & Al-Shabib, D.K. (2012). Effects of Macroeconomic Variables Non-Stock Market: Saudi Perspective, International Journal of Financial Research, 5(4),120-127
Black, F., (2001).The effects of dividend yields and dividend policy on common stock prices and return. Journal of financial economics 1(1),478-531.
Brook, Y., Chalton, W., & Hendershott, R., (1998). Do firms use dividends to signal large future cash flow increase? International journal of Finance management 9 (27), 46-57.
Basse, T., & Reddemann, S. (2011).Inflation and the Dividend Policy of US Firms. Economy watch 6 (4), 333-64
Black, F. (1976). The Dividend Puzzle, Journal of Portfolio Management, 2, 5-8
Brook, Y., Chalton, W. and Hendershott, R. (1998). “Do firms use dividends to signal large future cash flow increase?”, Financial Management, Autumn, 46-57.
Brooks. C. (2002). Introductory Econometrics for Finance, 2nd Edition, and Cambridge University Press.;
Chen, N, Roll, R ., & Ross, A., (1986). Economic Forces and the Stock Market: Testing the APT and Alternative pricing Theories. Journal of Business.l59 (17), 383-403.
Dickey, D., & Fuller, W., (1981). Likelihood ratio statistics for autoregressive time series with a unit root.Econometrica 17(49), 1057 – 1072.
Duke, S.B., Ikenna, N.D. and Nkamare, S.E.(2015). "Impact of Dividend Policy on Share Price Valuation in Nigerian Banks." Archive of Business Research, 3 (1) 156-170
Gordon, M. J. (1959). Dividends, Earnings, and Stock Prices. The Review of Economics and Statistics, 41(2), 99-105.
Gordon, M., (1962).The Savings, Investment, and Valuation of A Corporation. Review of Economics and Statistics, 37-51.
Gordon, M. J., & Shapiro, E., (1956). Capital Equipment Analysis: The Required Rate of Profit. Management Science, 3 (1), 102-110.
Gujarati, N. (2004). Basic Econometrics. Singapore: Mcgraw-Hill.
Kalyanaraman, L., & Al-Tuwajri, B. (2014). Macroeconomic Forces and Stock Prices: Some Empirical Evidence from Pakistan, Asain Journal 11(7) 89-102
Kaul, G., (1990). Monetary Regimes and the Relation between Stock Returns and Evidence from the Finnish Stock Market. The Finnish Journal of Business Economics, 49(2), 209-232.
Maddala, G. S., & Wu, S. (1999). Cross-Country Growth Regressions: Problems of Heterogeneity, Stability, and Interpretation. Applied Economics, 32, 635–642.
Miller, M. H., & Modigliani, F. (1961).Dividend Policy Growth and the Valuation of Shares.The Journal of Business, 34, (4), 411-433.
Okpara, G. (2010).A Diagnosis of the Determinants of Dividend Payout Policy In Nigeria: A Factor Analytical Approaches. American Journal of Scientific Research, 8, 57-67.
Onoh, J.K.,(2002).Dynamics of Money Banking and Finance in Nigeria: An Emerging Market. Astra Meridian Publishers, Aba, Enugu, Lagos.
Copyright (c) 2017 Henry Waleru Akani , Yellowe Sweneme
This work is licensed under a Creative Commons Attribution 4.0 International License.