Dividend Policy and Manufacturing firm Performance in Nigeria

Controversy exists among scholars on the relevance of dividend policy to firm performance; however, literature often neglects the issues of persistence in profitability when examining the dividend-performance relationship. This study investigated the effect of dividend policy on a firm's performance in the Nigerian manufacturing industry regarding persistence in profitability. Different theories of dividend policy and firm performance were reviewed, and the study adopted the dynamic panel models to examine the relationship between dividend policy and firm performance using the secondary data obtained from 30 quoted manufacturing firms over 12 years in Nigeria. The study found a significant positive effect of dividend policy on firm performance as profitability persisted over time. Conversely, there exists a negative impact of firms' age on firm performance, while firm market share has a negligible positive impact on firm performance. The study supported the dividend relevance theory and recommended that firms maintain a sound dividend policy and keep a good track record of profitability to ensure a higher firm performance.