PRODUCTIVITY IMPACT OF DIVIDEND ON SHAREHOLDERS

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The dividend of shareholders and its impact on productivity has been severally been called into question. Most school of thoughts has it that dividend of shareholders does not have a significant impact on their productivity level while other schools of thoughts are of the contrary opinion. Dividend over time has had a leading role to play in corporate organizations and more especially in the wellbeing of shareholders. Dividend off course helps to is increase or improve the revenue base of shareholders, corporate monetary managers make different financial decisions and dividend policy decision is cardinal amongst them (Baker &Powell 1999). Dividend decision has a great impact on firm financial decisions and stock price and most importantly on its shareholders; an increase in dividends would improve the revenue base of its shareholders while a decrease in dividends would be on the contrary as their financial base would be negatively affected. Simians (1995) argue that the productivity of shareholders is largely influenced by the organization’s dividend policy. It is an approach that is used to distribute the profit back to its shareholders. If a company is in a growing stage, it may decide it will be reinvested in the company’s future projects rather than distributing the profit to shareholders. If a company decides to pay a dividend, it must decide how much and at what rate dividends should be paid. Dividend policy plays a frontline role to play in terms of the commitment and corporate productivity of its shareholders. If a company pays handsome returns to its shareholders it will help to improve the productivity of its shareholders thereby ensuring corporate growth of the company and vice versa. So we can say dividend policy has a strong impact on growth and productivity. Dividend policy is guidelines for financial managers, how to pay a dividend to the shareholders either through cash dividend or through fixed percentage dividend. The primary objective of any organization is to maximize the wealth of shareholders. The financial manager’s aim is to make a decision in such a way that shareholders receive the high contribution of dividend which leads to an increase in the price of the share. Because the market price is an indicator of profitability, progress, and productivity of both the shareholders and company by extension, however, it is an unresolved issue whether the dividend policy has an impact on its shareholder’s wealth.

1.2. STATEMENT OF THE GENERAL PROBLEM

The problem of productivity in corporate organizations especially when it comes to employees has overtime been a puzzle. This is a result of the general problem of less productivity on the part of employees and this has negatively affected the corporate growth of companies. Overtime in Nigeria, shareholders dividend has witnessed a negative trend of continual retrogression due to the harsh economic situation of Nigeria.   A major offshoot of this malady has led to shareholders not giving their best as a result of a lack of financial motivation. This has negatively further affected the economic development of Nigeria.

1.3. OBJECTIVES OF THE STUDY

The following would be the aims and objectives of venturing into this study.

To examine the impact of dividends on shareholders’ productivity. To know the impact of prompt payment of dividends on the growth of an organization. To examine the relationship between shareholders’ productivity and dividends. To recommend ways of improving shareholders productivity in Nigeria

1.4. RESEARCH QUESTIONS

The following would guide us as our research questions

What is the impact of dividends on shareholder’s productivity? What is the impact of prompt payment of dividends on the growth of an organization? What is the relationship between shareholders’ productivity and dividends? Can shareholders’ productivity be improved through the payment of dividends?

1.5. RESEARCH HYPOTHESIS

H0: Dividends do not significantly influence shareholders’ productivity.

H1: Dividends significantly influence shareholders’ productivity.

1.6. SIGNIFICANCE OF THE STUDY

This study would be of immense benefit to corporate organizations in terms of the pros and cons of dividend policy and how it relates or affects shareholders. This work would equally be beneficial to the government at all levels, students and researchers who are interested in the impact of dividends on shareholders’ productivity.

1.7. SCOPE AND LIMITATION OF THE STUDY

This work is restricted to the productivity impact of dividends on shareholders with Dangote cement plant Lagos serving as a case study.

Limitation of the study

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire, and interview).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted to the research work.

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