Asymmetric Information and Dividend Policy in Emerging Markets: Empirical Evidence from Nigeria

Godwin Chigozie Okpara
2010 International Journal of Economics and Finance  
The study investigated the relationship between asymmetric information and dividend policy in Nigeria. To carryout the research work, the researcher employed the unit root test using the augmented Dickey Fuller test, the Johanson cointegration test and then vector error correction model to ascertain the long-run relationship between the variables. Granger causality test was also used. The researcher found supportive evidence for the dividend signaling theory. Thus, there is a positive and
more » ... positive and significant relationship between dividend policy and asymmetric information. The Granger causality tests at lag 2 suggested that dividend policy has causal impact on information asymmetry without a reverse or feedback effect. That is dividend policy drives or granger causes information asymmetry. others. The level of information asymmetry can be characterized by the risk of trading with a privately informed investor. The decision of the firm regarding how much earnings could be paid out as dividend and how much could be retained is the concern of dividend policy decision. The optimal dividend policy is the one that maximizes the www.ccsenet.org/ijef . On the consistency of the Black-Scholes model with a general equilibrium framework. Journal of financial and quantitative analysis 22, 259-275. Brown, S and Stephen A. Hillegeist. (
doi:10.5539/ijef.v2n4p212 fatcat:7x2nfiq4trazpizosfbbhvuxry