Board characteristics, ownership structures and propensity to pay dividends : the moderating effect of blockholders ownership

Dividends payout is important to shareholders as it serves as a return on their investments and a mechanism for controlling agency problems. However, non-dividend paying firms on the Nigerian Stock Exchange (NSE) have continued to increase over the years. The study is aimed at investigating the effect of board characteristics and ownership structures on the propensity to pay dividends and the moderating role of blockholders ownership in Nigeria. The study employs non-financial firms listed on the NSE spanning from 2009 to 2015 and return on assets, firm size and investment opportunities are used to construct the propensity to pay dividends. The study also uses random panel logit regression technique, with 89 sample firms with 596 firm-year observations. The regression results from the direct model showed that board diversity, financial experts, foreign and managerial ownership are strongly related to propensity to pay dividends. However, blockholders reduced propensity to pay dividends and theoretically, implied that they are less likely to use dividend in controlling the managers. Further, the interaction regression results revealed strong positive interaction between blockholders and board size; board diversity and CEO tenure and propensity to pay dividends. Thus, suggesting the importance of blockholders in the firm’s governance structures in the sense that they jointly increase the propensity of paying dividend and used dividend payout as a monitoring tool in addressing agency problems. The study recommends that the regulatory authorities should strengthen the rules regarding board diversity and CEO tenure as they affect the propensity to pay dividends of firms listed on the NSE.