Applied Economics and Finance Vol. 4, No. 5; September 2017 ISSN 2332-7294 E-ISSN 2332-7308 Published by Redfame Publishing URL: http://aef.redfame.com 1 Analysis of Dividend Policy and Its Impact on Shareholders Wealth Maximization in Nigerian Firms (A Study of Brewery Industry) Cordelia Onyinyechi Omodero 1 , Kalu Ogbonnaya Amah 1 1 Department of Accounting, Michael Okpara University of Agriculture, Umudike, P.M.B. 7267, Umuahia, Abia State, Nigeria Correspondence: Department of Accounting, Michael Okpara University of Agriculture, Umudike, P.M.B. 7267, Umuahia, Abia State, Nigeria. Received: June 1, 2017 Accepted: July 13, 2017 Available online: July 16, 2017 doi:10.11114/aef.v4i5.2542 URL: https://doi.org/10.11114/aef.v4i5.2542 Abstract The study evaluated dividend policy and measured its impact on shareholders’ wealth maximization in Nigerian firms (a study of brewery industry). A cross-survey research design was adopted and secondary data extracted from the published annual reports of the firms studied. The statistical tool used was a multi-regression analysis and t-test for hypotheses testing and data analysis with the aid of SPSS version 20. The result in Guinness Nigeria Plc., indicated the irrelevance of dividend policy. From the result, the DPS, EPS and NAPS which were the explanatory variables, had no positive impact on the market value per share (MPS) both collectively and individually. The result from Nigeria Breweries Plc., proved dividend policy is relevant to an extent to which earnings per share and net asset per share are positively affected. The F-ratio was 0.000 which shows a significant positive impact on the MPS. The earnings per share and net asset per share were also significant except the dividend per share which had no impact on the market value per share. The implication is that the growth in stock prices is not always a function of dividend payment. Keywords: dividend policy, dividend per share, earnings per share, market price per share, net asset per share 1. Introduction Dividend has been defined by the Institute of Chartered Accountants of India, as “a distribution to shareholder out of profits or reserves available for this purpose”. According to Rustagi (2001), “the term dividend refers to that portion of profit (after tax) which is distributed among the owners/shareholders of the firm”. Maheshwari (1999) defines dividend as the return the shareholders receive from the enterprise, which is a portion taken out of the profit, for their shareholdings. Therefore, dividend policy of a firm determines and influences a company’s decision in its payments to the shareholders and the amount to be retained (Omodero, 2005). Business Jargons (2017) refers to dividend policy as a financial decision that is focused on the proportion of the firm’s earnings to be paid out to the shareholders. That means, the company has to decide on the portion of the profit to be distributed to the shareholders as dividend or to be ploughed back into the business. History has proved that investors depend on dividend payment ratio in their decision to invest in companies. Thus, firms that pay high dividend are more attractive to investors, but from the firms’ point of view, high dividend payment increases their financial burdens. High dividend payment companies reduce payment at a certain level to maintain the financial position of the firm (NainTarasarfarzRaja, 2014). This is the major difference between an investor and a speculator a speculator does not wants to take risk in response of abnormal return while an investor is more concerned with constitute performance of that assets in which he has invested his fund. This consistent performance of an asset (security) is dependent in the performance of the policies of the managers. The main responsibility of the financial manager is to maximize the shareholders wealth and it’s very important for him to have good understanding of dividend and dividend policy because any good and bad decision about dividend can affect the wealth of shareholders (NainTarasarfarzRaja, 2014). Dividend policy and its effect on the share prices of companies has remained a controversial issue. Many researchers have argued that dividend policy impacts on shareholders’ wealth (Enhardt, 2013; Ogolo, 2012, Azhagaiah & Priya, 2008) as against the work of Miller and Modigliani (1963) which holds the view that dividend policy has minimal effect on the investment decision of an investor. This controversy has necessitated this study. The focus is on the impact of dividend policy on the maximization of shareholders wealth in the two (2) major brewery firms in Nigeria, namely: Nigerian Breweries PLC and Guiness Nigeria PLC. Brewery firms in Nigeria especially the Nigeria Breweries Plc and Guinness Nigeria Plc make use of Dividend policy in other to create