Effect of Dividend Policy on Share Price of Quoted Banks in Nigeria

Dividend policy decisions profoundly affect investor perceptions and share price behaviour, and understanding their dynamics in the Nigerian banking sector is important for both investors and bank managers. This study examines the effect of dividend policy on the share prices of deposit money banks quoted on the Nigerian Exchange Group for the period 2014 to 2022. Secondary data were extracted from the annual reports of twelve quoted deposit money banks and the Nigerian Exchange Group price database. Dividend policy was operationalised using dividend per share, dividend yield, and dividend payout ratio. Share price was measured by the year-end ordinary share closing price. Panel data regression analysis using the fixed effects estimator was employed, following the Hausman test. Results showed that dividend per share had a significant positive effect on share price (coefficient = 2.34, p < 0.01), consistent with the dividend signalling hypothesis. Dividend payout ratio also positively affected share price (coefficient = 0.018, p < 0.05), though its magnitude was smaller. Banks that maintained stable dividend policies over the study period exhibited significantly lower share price volatility than those with irregular dividend histories. The study concludes that consistent and informative dividend policies are positively associated with higher share valuations in the Nigerian banking sector, lending support to the signalling theory of dividends. It recommends transparent and forward-looking dividend communication strategies for listed banks. Keywords: dividend policy, share price, quoted banks, dividend signalling, Nigerian Exchange Group