A Critical Assessment of Ownership Structure and Its Impact on Dividend Policy of Listed Deposit Money Banks in Nigeria Using a Sample of Three Banks




1.1 Background Of The Study

Generally, it has been suggested that regular payment of dividends can reduce agency conflict, and through this, the range of future probable misuse of resources by management is reduced. Dividends are part of corporate earnings distributed to shareholders for their participation in the process of capital formation of a firm. As a source of income to investors, it is a tool of assessing the ability of a company to generate positive cash-flow. However dividend payout has been an issue of interest in the financial literature which was initiated by Modgliani and Miller (1956-1961), Gordon and Lintner (1956-1962) who came up with relevance and irrelevance theory of dividend policy.  According to Mukhtar (2015), dividend policy is the financial decision on how much dividend should be paid to the shareholders who will not jeopardize the firms‟ growth as well as retaining and maintaining shareholders fund and value maximization. Globally, dividend policy and ownership structure have been a subject of concern for other stakeholders other than the management and have been largely researched (Gharaibeh, 2013). Other stakeholders, according to Obaidat (2018) and Al-Nawaiseh (2013), including as shareholders, employers, and consumers, claimed that this approach smoothed the dividend in order to maximize their own benefit.

However, dividend payout is influenced by a number of factors, including financing constraints, investment opportunities, and pressure from both external and internal stockholders, as well as ownership structure, among others.Firms must maintain a balanced mix of dividend payouts and retained earnings at all times. in order to take advantage of the growth opportunities created by the business environment and also maintain a healthy value for the firm. A balanced mix of dividends and retained earnings must be made by firms at all times.

In Nigeria, ownership is dispersed but varies between companies, although in most businesses, ownership is concentrated and firms are frequently controlled by a small group of linked shareholders (Hasnah, 2015). Therefore , in the setting of a growing economy like Nigeria, the ownership structure of firms may have a significant influence in deciding dividend pay-out agreements across corporations and minimizing agency concerns. Prior research on the link between ownership structure and dividend policy has mostly focused on firms in the United Kingdom, the United States, and other industrialized nations with highly regulated markets and ownership. In Nigeria, there are variety of ownership structure which significantly influences an organization’s dividends policy, among which include; managerial ownership, institutional ownership, ownership concentration and foreign ownership(Mossadak, Fontaine, & Khemakhem, 2016. With respect to the aforementioned ownership structures in Nigeria organisations, this study tends to examine the impact of ownership structure on dividends policy of Nigerian Banks.

1.2 Statement of the Problem

The complexities and sophistication of business structures that emerged after the industrial revolution led to the separation of business ownership from its control among firms (Soliman, 2010). In turn, this has led to the emergence of different categories of shareholders, which range from individual to managerial and institutional shareholders, among others. According to Ibrahim and Shuaibu (2016), the varying categories of owners in a firm constitute what is known as the ownership structure of the firm. Generally, what constitutes an ownership structure in any organization would include insider ownership (otherwise referred to as managerial ownership or director’s ownership), institutional ownership, concentrated ownership, foreign ownership, state ownership, government ownership, and other dispersed forms of ownership (Afolayan, 2015). In Nigeria, the most common ownership types include: managerial, institutional, ownership, concentration, and foreign ownership, which are easily represented and measured in the financial statements of companies, while others are not pronounced.

There has been a recurring agency problem in corporate finance organizations. According to Mitton (2005), an agency problem is a conflict of interest between a company’s management and its investors.

Furthermore, the Nigerian banking environment, according to Njogo, Ayanwale, and Nwankwo (2016), has seen a lot of dramatic shifts in the financial sector in recent years, with insolvent institutions going down the drain. The most recent merger was that of Access Bank and Diamond Bank. Consequent to this, the knowledge asymmetry that exists between bank management and shareholders creates a hurdle in determining how ownership structure affects bank dividend policy. The issue also emphasized the financial viability of dividend payments in light of Nigerian banks’ troubled signals. Given the foregoing, the purpose of this research is to critically examine ownership structures and their influences on dividend policy in commercial banks.



1.3 Objective Of The Study

The general goal of this study is to assess the ownership structure and its impact on dividend policy in commercial banks. To achieve this, the study will specifically:

  1. Determine whether the ownership structure of commercial banks has a significant impact on their dividend policy.
  2. Ascertain the ownership structure adopted by Nigerian commercial banks.
  3. Determine if managerial, institutional, concentration, and foreign ownership structures will have a significant impact on the dividend policy of commercial banks.

1.4 Research Question

The study will be guided by the questions below;

  1. Does ownership structure have any significant impact on dividends policy of commercial banks?
  2. What are the ownership structure adopted in Nigerian commercial banks?
  3. Does managerial, institutional, concentration and foreign ownership structure have asignificant impact on dividends policy of commercial banks in Nigeria?

1.5 Significance Of The Study

The information asymmetries that exist between the managers of banks and their shareholders create a problem in how their ownership structure influences their dividend policy. In respect to the above assertion, the findings of this study will critically examine ownership structure and dividends policy in Banking sector. Thus, the findings of the study will be useful to stakeholders in the banking industry.

Additionally, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regards to ownership structure and its impact on dividend policy in commercial banks.

  1. 6 Scope Of The Study

The general focus of this study is on ownership structure and its impact on dividend policy in commercial banks. However, the study will further ascertain if ownership structure has any significant impact on the dividend policy of commercial banks, ascertain the ownership structure adopted by Nigerian commercial banks, and determine if managerial, institutional, concentration, and foreign ownership structures will have a significant impact on the dividend policy of commercial banks. On this note, the study will be carried out at Access Bank and Zenith Bank in Bayelsa State.

1.7 Limitation Of The Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. However, the researcher were able to manage these just to ensure the success of this study.

1.8 Definition Of The Study

Dividend: A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders.

Dividends Policy: A dividend policy is the policy a company uses to structure its dividend payout to shareholders

Ownership Structure: An ownership structure concerns the internal organization of a business entity and the rights and duties of the individual holding the equitable or legal interest in that business.


Njogo, B. O,, Ayanwale, S. & Nwankwo, E. (2016). Impact of mergers and acquisitions on the performance of deposit money banks in Nigeria.

Mitton, T. (2005). Corporate governance and dividend policy in emerging markets.

Afolayan, O. O. (2015). Impact of corporate ownership structure on dividend policy of quoted conglomerates in Nigeria.

Ibrahim, I., & Shuaibu, H. (2016). Ownership structure and dividend policy of listed deposit money banks in Nigeria.

Soliman, M. M. (2010). Ownership structure, board composition, and dividend policies.

Mossadak, A., Fontaine, R., & Khemakhem, H. (2016). The relationship between ownership structure and dividend policy in an emerging market.

Hasnah, K. (2015). Ownership structure and dividend policy of conglomerates firms in Nigeria.

Al-Nawaiseh, M. (2013). Dividend policy and ownership structure: An applied study on industrial companies in Amman Stock Exchange.

Mukhtar, M. B. (2015). Ownership structure and dividend policy: an analysis of consumer goods industry in Nigeria.




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