African Development Finance Journal

Effect of Dividend Policy on Market Price of Ordinary Shares of Quoted Manufacturing Firms in Nigeria

Amah Peter Ngozi, Adejolu Temitope Segun, Onyeiwu Charles Ifeanyi — Mon, 24 Feb 2025 10:19:54 +0000

Understanding the micro-issue of relationship between financial policy variables and market price is crucial towards appreciating value-generating dynamics among economic sectors. This study investigates the effect of dividend policy on market price of ordinary shares of quoted manufacturing companies in Nigeria. The research focused on three specific policy variables namely: dividend payout ratio, dividend yield, and retained earnings. Ex-post facto research design and panel regression analysis were utilized to explore the relationships. Consistent with traditional right views, the study found significant relationship between the dividend variables and market price, indicating that higher payouts positively influence share prices. However, the analysis did not find evidence that retained earnings have a significant effect on share prices. This is a surprising result. The study recommends that manufacturing companies consider active use of dividend policy variables in maximizing shareholders wealth. Equally, companies should reassess the strategy of using retained earnings to finance operations.

Keywords: Dividend pay-out ratio, Dividend yield, Manufacturing Sector, Panel data regression, Retained earning

Enhancing Economic Growth through Transport Corridors: A Study of the Central Corridor Transit Transport Facilitation Agency

Okandju Okonge Flory, George John Nyaronga — Mon, 24 Feb 2025 10:32:59 +0000

Abstract

Transport corridors are critical conduits for facilitating trade, regional integration, and economic growth, particularly in regions with landlocked countries. This study examines the role of the Central Corridor Transit Transport Facilitation Agency in enhancing economic growth through the integration of infrastructure development, ICT solutions, and public-private partnerships (PPPs). Using a mixed-methods approach, the study analyzes data from regression analysis and qualitative interviews to assess the impact of these factors on economic performance. The findings reveal that infrastructure development has the most significant influence on economic growth, followed by ICT integration and PPPs. Infrastructure improvements, such as roads, rail, and port facilities, reduce transportation costs and transit delays, while ICT adoption streamlines logistics processes, enhances transparency, and improves operational efficiency. PPPs, though less direct in impact, play a crucial role in addressing funding gaps and fostering innovation in infrastructure projects. The study concludes that a multi-faceted approach combining investments in physical infrastructure, digital technologies, and collaborative frameworks is essential for optimizing the Central Corridor’s potential as a trade facilitator. Policy recommendations include prioritizing infrastructure investments, harmonizing ICT systems across borders, strengthening regulatory frameworks for PPPs, and enhancing regional cooperation. These measures can significantly boost the corridor's efficiency, making it a vital driver of economic growth for East and Central Africa.

Keywords: Economic Growth, Infrastructure Development, ICT Integration, Public-Private Partnerships (PPPs), Trade Facilitation, Regional Integration, Logistics Efficiency, Transit Transport Systems

Financial Distress, Earnings Management, and the moderated role of Audit Quality: Evidence from East African Countries

Heri Gasper Mulamula — Mon, 24 Feb 2025 10:43:03 +0000

Abstract

This study contributes to the current literature by providing further evidence of the relationship between financial distress and earnings management for the listed firms during economic shocks. In addition, it extends the existing literature by investigating the moderated role of audit quality in the association between financial distress and earnings management. Using the unique data set of the East African listed firms, the study analyses 303 firm-year observations of distressed firms from 2009 to 2019. Financial distress as an independent variable was measured by using the Attman Z-score. Moreover, accrued and real earnings management as dependent variables were measured using the modified Jones model and Roychowdhury model, respectively, while audit quality was measured using audit fees. The finding suggests that financial distress is negatively related to accrued-based and real earnings management. The finding also shows that audit quality moderates the impact of financial distress on real earnings management but not accrued earnings management. The finding has practical implications for shareholders, policymakers and auditors to design appropriate measures that can help to reduce the impact of financial Distress on EAC-listed firms.

Keywords: Financial Distress, Earnings management, Accrued Earning Management, Real Earnings Management, Developing Countries and Audit Quality

Joint Effect of Interest Rate Spread, Liquidity Creation and Firm Characteristics on Firm Performance

George Ndiritu, Cyrus Iraya, Kennedy Odhiambo Okiro, Samuel Nyandemo — Mon, 24 Feb 2025 10:52:37 +0000

The study had a general objective to evaluate the relationship among interest rate, liquidity creation, firm characteristics, and performance of commercial banks in Kenya. The study relied on balanced panel data where secondary data was collected from 38 active financial institutions in Kenya for a ten-year period from 2008-2018. The study used a descriptive research design and was subjected to random effects panel regression analysis. Hypotheses were tested at 95 percent confidence levels (p<0.050) to determine the effect of the independent variable, moderating variable and intervening variable on the performance of the banks which was the dependent variable. The results indicated that interest rate spread as an independent variable, was significant in determining the performance of the banks. The study also established that liquidity creation was a non-intervening variable in the relationship between interest rate spread and performance. Firm characteristics including firm size, age and ownership did not exert a moderating effect on the relationship between interest rate spread and performance. Moreover, the results revealed a significant joint effect of interest rate spread, liquidity creation and the firm characteristics on performance. The results of this study add to existing knowledge by using liquidity creation as an alternative metric for performance measurement, which the banks can utilize to remain afloat by meeting their immediate monetary demands for their external clients and their internal daily financial requirements. Maintaining a narrowed spread in interest rates is also crucial in maintaining a competitive edge in an increasingly competitive financial market. The study also contributes to improving the existing literature and body of information in determining the predictors of firm performance in Kenya. It provides evidence against firm characteristics as unreliable predictors.

Keywords: Interest rate spread, liquidity creation, firm characteristics, firm performance