THE EFFECTS OF DIVIDENDS ON THE PRICE OF ORDINARY SHARES IN SOME QUOTED COMPANIES

CHAPTER ONE

INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

 

Abstract

This study is on the effects of dividends on the price of ordinary shares in some quoted companies. The total population for the study is 200 staff of Nigeria bottling company plc, Edo state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made human resource managers, production managers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

 

 

 

 

 

 

 

 

 CHAPTER ONE

INTRODUCTION

• Background of the study

The effect of dividends on ordinary shares value has been accorded extensive investigation by financial analyst in the literature. In the main, a company’s dividend policy could not be ignored or understand while valuing the shares of any company. Basically, it (dividend policy) is the determination by management of the proportion of earnings to be returned as a source of internal financing and how much shareholders should prudently be rewarded for their investments taking into consideration the financial requirements of the company. Since dividend policy affects the overall financial management of a company, therefore, management has to exercise a high degree of scription in establishing a dividend pattern for their companies. Thus, a prudent board of directors will deem if fit to establish a dividend policy which can be easily implemented because the reward for shareholders investment could either be a financial package or other incentives like script issues, bond issues etc or both. Empirical studies so far indicate a wide curiosity of dividend decision not only among industries but also among companies in the same industry. While some over jealous management will put their dividend returns on a very high plateau only to realize later that it endangers the company, others would adopt a relatively ranging reward policy which will include both cash and incentives annually, and which ever policy is followed some theories believes that it will affect the value of the company. Others however, are of the view that the dividend policy adopted by a company is irrelevant to both the value of its shares and the wealth of its shareholders given the firm’s investment policy and the risk class, this controversy has attracted the attention of eminent analyst in the financial interaction and this is what constitute the domain of this study.

1.2 STATEMENT OF THE PROBLEM

The effect of a firm’s dividend policy on the price of its shares is of considerable importance not only to the corporate financial officials who most put (set) in place the policy but investors planning portfolios and economists seeking to understand and appraise the functioning of the of the capital markets. However, no consensus has yet been achieved from studies conducted on the issue. For instance Watt (1973) using annual data argued that the information content of dividends can only be trivial and thus may not have influence on ordinary share prices. In contrast to this Pettit (1972) and Lauub (1976) using quarterly data suggested that dividends announcements, conveys information beyond that already reflected in contemporizes earning numbers and consequently may affect share prices. This critical problem of not having a clear (empirical) explanation of the effect of dividends on the price of ordinary shares is what caught (attracts) our attention to this study:

1.3 THE OBJECTIVE OF THE STUDY

In Nigeria, studies have been conducted in the pattern of dividend policies pursued by Nigeria companies. These studies often seems to say little or nothing about the effect of dividends on the price of ordinary shares even in the advance countries where studies have been conducted on the issue, options are different and in addition of the studies made use Nigeria data.
According to Odite (1977) many of the models stated in the literature are more relevant to the advanced economies. Thus, most of what is obtainable here may not be applicable at least completely in Nigeria. The specific purpose of this study therefore:

(1)     To establish and explain the effect of dividends on the price of ordinary shares

(2)     Do shares of companies with feverous distribution policy consistently sell at a premium

(3)     To ascertain if increase in dividends declared could lead to an increase in ordinary shares prices.

(4)     To examine if shareholders ever bother about how their earnings were distributed.

1.4 RESEARCH HYPOTHESES

 For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀ there is no effect of dividends on the price of ordinary shares
 H₁:   there is no effect of dividends on the price of ordinary shares

H₀²:   shares of companies with feverous distribution policy is not consistently sell at a premium

H₂:   shares of companies with feverous distribution policy consistently sell at a premium

1.5 SIGNIFICANCE OF THE STUDY

The study will give a clear insight on the effects of dividends on the price of ordinary shares in some quoted companies. The study will be beneficial to students and organizations. It will also serve as a reference to other researchers that will embark on this topic

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the effects of dividends on the price of ordinary shares in some quoted companies. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 DEFINITION OF TERMS

DIVIDEND: A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders.

ORDINARY PRICE: The ordinary price claims provisions of the Competition Act. … They prohibit the making, or the permitting of the making, of any materially false or misleading representation, to the public, as to the ordinary selling price of a product, in any form whatever

SHARE: The owners of shares are called “shareholders.” The distribution of shares in a company indicates the distribution of ownership in the company. A share’s value in a company or an investment is based on the price at which a share is sold in the market.

QUOTED COMPANY: Quoted Company a public JOINT-STOCK COMPANY the shares of which are traded either on the main STOCK EXCHANGE or related secondary markets such as the UNLISTED-SECURITIES MARKET.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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