Capital Structure and Dividend Payout of Quoted Agriculture Firms in Nigeria: Moderating Effect of Financial Performance

Despite the previous effort to analyze the capital structure and dividend payout interface with mixed results, it appears the moderating effect of financial performance on the nexus was yet to be empirically examined. This study examined the moderating effect of financial performance on the relationship between the capital structure and dividend payout ratio of quoted agriculture firms in Nigeria. Debt-equity ratio and debt-assets ratio were the proxies of capital structure, while dividend payout ratio measured dividend payout. Return on asset was the proxy for financial performance. Adopting an ex-post facto research design, the panel data sourced from the annual published accounts of the firms were subjected to multiple regression analysis using STATA 13. The results showed that the debt-equity ratio has a negative and significant effect on the dividend payout ratio of quoted agriculture firms in Nigeria. The debt-assets ratio has a positive and insignificant effect on the dividend payout ratio of agriculture firms in Nigeria. Return on assets has a positive and significant effect on the dividend payout ratio of quoted agriculture firms in Nigeria. Furthermore, return on assets has a negative and significant moderating effect on the relationship between debt-equity ratio and dividend payout ratio, while return on assets also has a negative and insignificant moderating effect on the relationship between debt-assets ratio and dividend payout ratio of quoted agriculture firms in Nigeria. The firms should use debt-financed assets more productively to generate an optimum return on assets to reverse the negative effect of the debt-equity ratio on the dividend payout ratio if they are to consistently pay competitive dividends and attract investment.