Investigating Causality Effect of Tax Measures on Dividend Policy of Quoted Companies in Nigeria Stock Exchange: 2000-2011

Abstract

The performance of taxes measures on quoted companies in Nigeria has gained little or no attention from the empirical point of view. This study looked at the causal relationship of variable indicators of taxes on pooled dividend policy of sectors specifics in the Nigerian Stock Market covering quoted period of 12 years. Granger Causality Test Statistic was employed to evaluate the causality effect of Pooled  Corporate Tax (PCTX), Pooled   Earnings Per Share (PREH) and Pooled Return Earnings Per Share (PEPS) on  Pooled  Dividend Payment Policy (PDPT) in Nigeria. The OLS empirical results from the study showed that the results of the estimated pool model indicated that PCTX was negatively related to PDPT while PEPS and PREH were positively related to PDPT. The result also shows that there is overall statistical significance among PEPS, PREH and PDPT, and about 78.2% analysis indicated model fit while 70% of the exogenous variables can explain the endogenous variable. Granger Causality Test Statistic was employed to evaluate the causality effect of Pooled  Corporate Tax (PCTX), Pooled   Earnings Per Share (PREH) and Pooled Return Earnings Per Share (PEPS) on  Pooled  Dividend Payment Policy (PDPT) in Nigeria and the result revealed that PDPT granger causes PEPS and PCTX in the short. The study recommended that there should be a total aggressive and positive performance in the various quoted companies of especially in the construction sector. Also suggested that genuine record of market performance of the quoted companies should be guided and use as reliable record based for future performance.

Keywords: Pooled Data, Granger, Dividend Policy, tax, Performance.