An Evaluation of Determinants of Dividend Policy of Listed Deposit Money Banks in Nigeria

Abstract

The practice of earnings management involves altering figures being reported, through the use of the judgmental discretions as allowed by the Generally Accepted Accounting Principle (GAAP). This is, to either mislead the users into believing what is actually not true in respect of the earnings’ figures, and hence secure favourable response (like increased demand for the firm’s shares); or to influence contractual outcomes which depend on the reported earnings. The paper examines whether dividend pay-out, profitability, tax rate and size influence earnings management of Nigerian listed deposit money banks. The population consists of the fourteen Nigerian listed deposit money banks as at 31st December, 2019 making it a census sampling. The design used for the study is ex-post facto method, as such, the non-survey design is adopted to actualize the research objectives. Secondary source of data collection was used and the data were extracted from the annual reports and accounts of the banks for the period of ten years (2010-2019). STATA was employed as the tool of data analysis. Findings revealed Dividend pay- out, size, profitability and tax rate influence earnings management of deposit banks. Based on the findings, the study concludes banks can manipulate profit in order to pay less tax and then pay dividend despite its liquidity problems and the existence of huge nonperforming loans. The study recommends the sustainability of CBN policy on liquidity position and thresholds regarding payment of dividend.