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ABSTRACT
The study examines the effect of board characteristics on the dividend policy of listed banks in Nigeria. Specifically, the study investigated the effect of board independence, board size and audit committee size on dividend policy of quoted banks. The motivation for this research is our observation that previous studies on corporate governance and dividend policy have been inconclusive. The longitudinal research design was used for the study. The population of the study consisted of the 15 banks quoted on the Nigerian Stock Exchange. The entire population was used as the sample for the study covering the period 2010-2016. The data analysis procedure includes descriptive statistics, correlation analysis, the Ordinary Least Square and the Two-Stage Least Squares Regression analysis in the estimation of the model. The result reveals that adjusted R2 is higher than that of the OLS at 60.3%. The analysis of coefficients reveals that BDS maintains its significance (p=0.000) and positive beta (3.443); BIND maintained a negative beta (-54.4768) and significance (p=0.341) at 5% and, as observed, the coefficient is stronger after controlling for endogeneity. BDSIZE is also positive (1.7526) though not significant (p=0.6182) at 5%. AUDCS has a positive beta (3.4439) and significant (p=0.004) at 5%. The control variables all maintained significance except for DEBT. Particularly, the performance of DIV (-1) is highly significant which seems to confirm that current dividend is strongly influenced by previous dividend levels. One point to be emphasized is the J-stat test of overidentifying restrictions. The J-stat tests yield all p-values above 0.10, which means that a nullhypothesis could not be rejected. Hence, over identification restrictions are valid. The study concludes that corporate governance is crucial determinant of dividend policy in banks. The study recommends that corporate governance compliance in banks should be strengthened since it assures investors in corporations that they will receive adequate returns on their investments.
