COMPARATIVE ANALYSIS OF THE EFFECTS OF ACTIVE AND PASSIVE DIVIDEND POLICIES ON SHARE PRICE OF LISTED FIRMS IN NIGERIA

Dividend decision is one of the fundamental financial decisions which corporate organizations, have to make on continuous bases. This involves the determination of the proportion of earnings to retain and the proportion to distribute to shareholders. This concern has prompted many studies on dividend policy. This study examines the effect of active and passive dividend policies on share price of listed firms in Nigeria. The study uses a descriptive statistics, correlation and panel regression method in analysing the data collected from secondary sources. The study found that active dividend policy has significant positive influence on share price. On the other hand passive dividend policy has negative effects on share price. The sign conforms with the apriori expectations that dividend policy should exerts positive influence on the markets performance of dividend paying firms, while passive dividend policy firms will have negative effects on the market performance of the firms. In line with the findings of the study, it is recommended that firms in the Nigerian Stock Exchange should be more dividend-active. This will send strong signal to the market that the firms are performing and will attract more investors to buy the shares of the firms therefore creating more wealth for the shareholders. It is also recommended that lather than try to re-invest profit at all time, the passive-dividend firms are advised to be dividend active and conscious. By re-investing all the profits, the shareholders ’ wealth will not appreciate to their desired wishes since the market will deem the firms not to be performing well. This will lead to low patronage of their share, thus leading to lack of wealth creation since they only pay a dividend to meet shareholder demands