AN APPRAISAL OF THE IMPACT OF DIVIDEND POLICY ON ENTERPRISE, SHAREHOLDERS AND CREDITORS (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

AN APPRAISAL OF THE IMPACT OF DIVIDEND POLICY ON ENTERPRISE, SHAREHOLDERS AND CREDITORS

(A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

• CHAPTER ONE: INTRODUCTION

1.1     Background of the study

• Statement of the study


• Objective of the study


• Research Question


• The scope of the study


• The significance of the study

 

• CHAPTER TWO: LITERATURE REVIEW

Literature review summary

 

• CHAPTER THREE: RESEARCH METHODOLOGY

3.1     Research Design

• Area of study


• Population of the study


• Sample and sampling techniques


• Instrument for Data Collection


• Validation of Research Instrument


• Reliability of Research Instrument


• Method for Data collection


• Method for Data Analysis

 

• CHAPTER FOUR:

Data Presentation and analysis/Result

 

 

• CHAPTER FIVE: Discussion, Implication and Recommendations

5.1     Discussion of Result/findings

• Conclusion


• Implications of the Result/findings


• Recommendations


• Suggestions for further study


• Limitation of the study

References

Appendices

 

LIST OF TABLES

TABLE ONE:

Evaluation of shareholders preference to Dividend receipt or capital/gain /increase in share value

 

TABLE TWO:

Response from First Bank Management staff of the type of dividend policy used and its resultant effect.

 

TABLE THREE:

Shareholders Response on the low regular dividend plus extra used by First Bank plc

 

TABLE FOUR:

Evaluation of informational content of dividend payment on reported earning with regards to first Bank share value

TABLE FIVE

Evaluation of creditor interest safety in the context of dividend payment.
CHAPTER   ONE

Introduction

1.1       BACKGROUND OF THE STUDY

In an important article on dividend policy, Miller and Modigliain (mm) (1961) argued that dividend policy has no effect on either the price of a firm^’s stock or its cost of capital. Miller and Modigliain stated that dividend policy is irrelevant. They reasoned that the value of a firm is determined   by its basic earning power and its risk class and therefore that a firm^’s value depends on its assets investment policy rather than on how earnings are split between dividends and retained earnings .M and m demonstrated under a particular set of assumptions, that if a firm pays higher dividends, that it must sell more stock to new investors and that the share of the value of the company given up to new investors is exactly equal to the dividend paid out.

The M & M theory has been criticized by the shareholders on the grounds that it is based on unrealistic assumptions like absence of personal and corporate income taxes, on stock transaction or floatation cost, manager and investors having the same set of information regarding future investment opportunities , and dividend policy having no effect on cost of capital . Some theorists against M & M’s theory of dividend irrelevance have actually gone ahead to argue that investors value the cash dividend receive more highly than additional increases share value (capital gain). Gordon (1963) and linter (1962) are infact theorists who   put up this claim. If this is indeed true, then a firm could maximize its share value by paying his dividends. This world obviously mean that dividend policy is indeed relevant and of some impart on the firm and the market.

An important aspect of dividend policy share in companies with high payout policies. And those with no need for current investment income usually own shares in companies with low payout policies.

 

Making the dividend decision is not an easy task, for corporate managers. Infact numerous factors are taking into consideration in setting dividend policy. Some of these factors are legal restrictions, ownership control, volatility of earnings, clientele, availability of other sources of financing and dept contracts. The extent to which corporate directors effectively handle these factors determines the nature of the impact [positive and, or negative] which would follow the decision taken.

 

 

• STATEMENT OF PROBLEM

This research work is concerned with profaning solution to the under listed problems among others:-

• Dividend policy setting in first Bank


• Effect of different dividend policies used by First Bank .


• Dividend payment on First Bank’s share value and reported earning


• Securities/criteria provided by First Bank’s in order to protect creditors interest with regard to its dividend payment.

5                   What are the securities/ criteria provided by First bank in order to protect creditor’s interest with regard to its dividend payments?

 

 

1.3            OBJECTIVES OF THE STUDY

It is the intention of this study:-

• To identify and discuss the issues relevant to dividend policy setting in first bank.


• To examine different dividend policies used by first bank looking at the resultants effects.


• To examine the impact of dividend payments on first bank’s share value, as well as that of reported earnings on first bank’s share value.


• To identify and evaluate existing measures and procedures for protecting creditors’ interests relative to dividend payments.

 

• RESEARCH QUESTION

It is the intention of study to proffer solutions to the following question:-

• Does issue relevant to dividend policy setting affect first bank positively or negatively.


• What type of dividend? Policy is used by first bank and what are the resultant effects.


• What Impact or role does dividend payments play or share value as well as reported earnings or first bank’s share value.


• What methods, measures or procedures are adopted by first bank for protecting creditor’s interests with regard to dividend payments?

 

 

 

• SCOPE OF THE STUDY

The subject of dividend policy is one, which encompasses very many issues and problem. For part from the general constraints within which dividend policy has to be adopted, there are other factors or issues which are quite important and which may very according to business environment, examples, currency exchange rates, fiscal policy, and dividend payout method etc.

This research focuses on just one selected problem, for each of the

Parties consumed-the company, its shareholders and the creditors. The issues and problems to be discussed will pertain to the business environments of Nigeria.

 

• SIGNIFICANCE OF THE STUDY

This research seeks to aid dividend policy making in first bank, as well as investors indecision taking: It is also being done with a view to protecting corporate dept security holders with regard to dividend policy.

More specifically, this significant for this following reasons:-

• It will highlight the impact of dividend policy of first bank, its shareholders and creditors.


• It will emphasize the need for adequate measures for protecting creditor claim upon the assets of first bank.

Finally, this research could serve a good reference material for other researchers or scholars and of benefits to other banks in generally.

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