Managerial Irrationality and Dividend Policy of Non-Financial Firms in Nigeria

Abstract

The study examined the effect of managerial irrationality (Hubris Hypothesis) on dividend policy of 27 non-financial firms listed on the Nigerian stock exchange for the period 2011 to 2022. The specific objectives were to ascertain whether managerial overconfidence, chairman-CEO duality, ownership concentration, firm growth, leverage, total assets and profit after tax significantly affect firms’ dividend policy. To this end, the panel data analysis econometric technique was employed for analysis of data, and the results obtained revealed that while managerial overconfidence has significant positive effect on dividend policy, profit after tax has a significant negative impact on dividend policy. The other hypothesized variables such as chairman-CEO duality, ownership concentration, firm growth, leverage and total assets do not have any significant relationship with dividend policy of firms in Nigeria. The study recommends among others that, board of directors intending to grow their firms should endeavour to recruit managers who do not have such behavioural trait/biases. Also, a higher proportion of independent directors should be engaged on the board in order to mitigate the effect of managerial overconfidence and dominance and reduces the probability of the firms not to pay dividend.

Keywords: Managerial Irrationality, Dividend Policy, Non-Financial Firms and Econometric Methods.