The Effect of Dividend Policy on Share Prices of Listed Banks in Nigeria

This study investigates the effect of dividend policy on share prices of listed commercial banks in Nigeria. Dividend decisions are among the most consequential financial choices made by corporate boards, with significant implications for investor returns and share price stability. In Nigeria's banking sector, where retail investors rely heavily on dividend income, policy inconsistencies have raised concerns about shareholder value creation. This study adopts an ex-post facto research design, using secondary data from the annual reports and stock market publications of 10 listed banks on the Nigerian Exchange Group for the period 2019 to 2023. Variables include dividend per share, dividend payout ratio, earnings per share, and share price. Panel data regression analysis with fixed effects estimation is employed. Results reveal that dividend per share has a significant positive effect on share prices, confirming the relevance of dividend signaling in the Nigerian banking market. The dividend payout ratio also showed a positive but less statistically robust relationship. Earnings per share emerged as the strongest overall predictor of share price movements. The study concludes that dividend policy is a meaningful signal to investors in Nigerian banking stocks and should be managed strategically to protect shareholder confidence. It recommends that bank boards maintain consistent dividend policies and communicate changes transparently to minimize market volatility and preserve investor trust.

Keywords: dividend policy, share prices, commercial banks, Nigerian Exchange Group, signaling theory.