ABSTRACT

The efficient and effective financial administration in corporate organization is sine quad non’ to the achievement of the organizational objective.

Dividend policy is said to be financial policy that is responsible for the determination of the market price of shares. But there are divergent views on the effect of dividend policy on the market price of shares. Dividend relevance and dividend irrelevance theories. The regression analysis performed on the secondary data collected, using market price of shares as dependent variable, dividend per share, retained earnings per share and earnings per share as independent variables, revealed that there is significant relationship between dividend policy and market price of shares. It was also revealed that dividend affect market price of share more than retained earnings. It was also concluded that the belief of the dividend irrelevance theorists is wrong in the real life situation where forces of demand and supply play a determining role. It was recommended that financial administrators study and educate the environment in the formulation of dividend policy. Hence, optimum dividend policy will be achieved which in tum increases the value of the business firm.