Empirical Analysis of Stock Market Efficiency on Gross Domestic Product (GDP) in Nigeria

This study examines the effect of dividend policy measured by dividend payout ratio and dividend yield on firms’ earnings measured by earnings per share in Nigeria. Dividend policy is a critical financial decision influencing firms’ performance, yet there remains considerable debate regarding its impact on corporate earnings. This research specifically focuses on 40 listed firms in Nigeria across various sectors from the financial years 2018 to 2021, resulting in 160 firm-year observations. The study employs Panel Estimated Generalized Least Squares with cross-section random effects to analyze the relationship between dividend policy and firm earnings. Findings reveal a weak negative relationship between dividend distributions and firms' earnings, with share prices experiencing a downward trend following negative dividend announcements. Additionally, the study finds that dividend yield has an insignificant effect on firms’ earnings, suggesting that share price movements in the Nigerian stock market are not strongly tied to dividend policy decisions. However, a strong positive relationship exists between earnings per share and firms' earnings, as share prices tend to rise following positive dividend announcements. Based on these findings, the study recommends that firms maintain a stable and consistent dividend payout policy to enhance investor confidence and stock market performance. Since dividend announcements influence share price movements, listed companies should strategically manage their dividend policies to maximize shareholder value and sustain high share prices on the Nigerian Exchange Group.