How Do Profitability and Institutional Ownership Drive Value through Dividend Policy? Evidence from Nigeria

Ovbe Simon Akpadaka, Musa Adeiza Farouk, Dagwom Yohanna Dang


This study examines how dividend policy, profitability, and institutional ownership affect the value of a company. This study also examines how dividend policy affects the paths of profitability, institutional ownership, and firm value in the Nigerian Exchange Group (NGX). The study used a longitudinal research design with 46 purposively sampled firms and a dataset spanning from 2012 to 2022, yielding 417 observations. We used multiple path analyses with bootstrap mediation and 2000 replications to examine the manufacturing sector and five subsectors. This helped us understand how exogenous variables affect endogenous variables in a more complex way by showing their direct, indirect, and total effects. The most important results showed that 1) DPS, which stands for dividend policy, did not have a significant mediating effect on profitability at the aggregate or subsector level; 2) DPS did have a significant positive mediating effect on institutional ownership at the aggregate level; and 3) DPS had a significant negative mediating effect on consumer staples. This study covered the manufacturing firms listed on the NGX, which limits the outcome’s applicability to other sectors and geographic regions. Some implications for investors and regulators are that institutional ownership and dividend policy (DPS) are potent tools for mitigating agency costs and that dividend payments send signals and help reduce information asymmetry, which ultimately positively impacts value. This study contributes to the literature on mediation analysis in a novel manner by applying bootstrap mediation analysis within the geographic context of Nigeria, which brings a new perspective to financial analysis methodology in emerging markets.

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Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online) Email:

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