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Effect of Dividend Policy on Market-Based Wealth of Shareholders in Nigerian Pharmaceutical Firms

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  • December 4, 2025
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Ojeh Augustine PhD 1 Geoffrey Ndubuisi Udefi PhD 2 Festus Ndubuisi Nkwo 3 & Okonkwo, Bonaventure .S. PhD 4

Abstract         

This study investigates the effect of dividend policy on the market-based wealth of shareholders in Nigerian pharmaceutical firms, measured through Market Price per Share (MPPS). Specifically, the study examines how Dividend per Share (DPS), Dividend Payout Ratio (DPR), Retention Ratio (RR), Dividend Yield (DY), and Earnings per Share (EPS) influence MPPS. The objectives of the study were to: (i) determine the effect of DPS on MPPS, (ii) examine how DPR affects MPPS, (iii) analyze the impact of RR on MPPS, (iv) assess the effect of DY on MPPS, and (v) evaluate the influence of EPS on MPPS. An ex-post facto research design was employed, using audited annual reports of five listed pharmaceutical firms in Nigeria covering 2014–2024. Panel data were analyzed using panel least squares regression to establish the statistical effects of the dividend policy variables on MPPS. The findings reveal that DPS (β = 0.406, p = 0.0000), RR (β = 0.391, p = 0.0000), DY (β = 0.544, p = 0.0000), and EPS (β = 0.534, p = 0.0000) have positive and statistically significant effects on MPPS. Conversely, DPR shows a negative and significant effect on MPPS (β = –0.217, p = 0.0058). The model demonstrates strong explanatory power (R² = 0.998; F-statistic = 4849.50, p < 0.001), indicating that dividend policy variables collectively explain a substantial portion of changes in MPPS. The implications of these findings suggest that investors in the pharmaceutical sector place high value on firms with strong earnings performance, attractive dividend yields, and strategic earnings retention. Excessively high payout ratios may be interpreted as limiting future growth potential, thereby reducing market valuation. This underscores the need for firms to achieve an optimal balance between dividend distribution and reinvestment. The study concludes that dividend policy significantly determines shareholder wealth in the Nigerian pharmaceutical sector. Accordingly, the study recommends that pharmaceutical firms adopt sustainable dividend policies that balance dividend payouts with adequate earnings retention, strengthen transparency in dividend decisions, and align dividend strategies with long-term value creation.

Keywords:  Market Price per Share, Dividend per Share, Dividend Payout Ratio, Retention Ratio, Dividend Yield, Earnings per Share, Dividend Policy, Pharmaceutical Firms.

Cite: Ojeh, O., Udefi, G. N.,  Nkwo, F.N. & Okonkwo, B. S.  (2025). Effect of Dividend Policy on Market-Based Wealth of Shareholders in Nigerian Pharmaceutical Firms. International Journal of Accounting Research and Financial Insights,4 (1), 16-30.

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