GOVERNANCE PRACTICE AND DIVIDEND PAYOUTS: THE ROLE OF SECTORS

Abstract

Corporate governance (CG) safeguards shareholders’ portfolios and ensures optimal returns in terms of dividend payouts (DPs) on their investment.  The association between CG and DPs could be significant in relation to risk exposure, operational and financing activities across firms and sectors. The relationship between the two has been well documented, however; the role of industry classification on the relationship has not been given adequate consideration in the literature. Agency theory underpins the model which captures the effects of CG on DPs.  This study, therefore, examines the moderating roles of industry on the relationship in Nigeria between 1995 and 2012; and utilised system generalised method of moments technique in its analysis. Empirical findings of the study indicate that the relationship between CG and DPs is positive in few subsectors while it is negative in some subsectors respectively. Therefore, it is suggested that the Security and Exchange Commission (SEC) in connection with the Nigerian Stock Exchange should provide needed interventions to the subsectors showcase negative relationship so that their CG could be enhanced.