ABSTRACT

The study explores the effect of taxation on dividend policy of banks in Nigeria. It underscores various assumptions on dividend and its policy. The study identifies how sometimes companies find it difficult deciding on the particular dividend policy to adopt when companies retain earnings for a long period without paying dividend The main objective of this study is to determine the extent to which taxation affect dividend policy of banks in Nigeria. The source of the study was obtained using secondary data from the annual report of First Bank Nigeria Plc. for period 2011 to 2015 financial year. The data of this study was analysed using regression model. Based on the analysis and the empirical results the study revealed that the estimated coefficient of the regression parameter have a negative sign and thus conform to our a-priori expectation. The study revealed an inverse relationship of the independent variable company income tax (CIT) and the dependent variables dividend per share, dividend payout and dividend yield. Based on the findings of this study, the study concluded that dividend policy is a guideline or principle on which the management of every firm bases the systematic distribution of their earnings or profit after tax to their shareholders and investors. The research recommended that an adoption of dividend policy by the banks particularly in Nigeria should be strictly considered based on the unique circumstances of the bank and not necessarily based on age long traditional factor often formulated by academics. This is essential in order to maintain a steady and reasonable policy.