Corporate performance entails attainment of both profit and wealth maximization goals of entities. The debatable issue on the proportion of earnings to retain for growth and to distribute as returns to the investors has gained interest over decades. Basically, it is a critical decision and quite challenging for the managers to decide on an appropriate and ideal dividend policy to adopt, that will improve earnings and transform the market in terms of value. In such decision dilemma, the managers are faced with the decision of whether to pay dividend or to plough back distributable earnings into the business. Therefore, this study examined the effect of dividend policy on return on asset and Tobin’s Q of non-financial firms listed in Nigeria.
Expost-facto research design was adopted. Convenience sampling techniques was used to select ten (10) out of thirty-three non-financial companies listed on the Nigeria Stock Exchange as at 31st December, 2017. The study covered a period of ten (10) years from 2008 to 2017. Data obtained from published audited financial statements already validated by external auditors were used. Descriptive and inferential statistics (regression analysis) were adopted in testing the hypotheses.
The study discovered that dividend policy had significant effect on return on asset (Adj. R2=0.195, Wald Chi2(4)= 28.25, ? = 0.00). Leverage had significant control effect in the relationship between dividend policy and return on asset (?Adj. R2=0.1925, ?Wald Chi2(5)= 28.74, ?=0.00). Dividend policy had significant effect on Tobin’s Q (Adj. R2=0.2411, Wald Chi2(4)= 13.74, ? = 0.01). Leverage had significant control effect in the relationship between dividend policy and Tobin’s Q (?Adj. R2=0.2396, ?Wald Chi2(5)= 13.37, ?=0.02).
This study concluded that dividend policy influenced return on asset as well as Tobin’s Q. Managers should ensure that relevant factors are duly considered in taking optimal dividend decision as this is important in attaining its profit and wealth maximization objective.