THE IMPACT OF E-DIVIDEND PAYMENT ON BANKING INDUSTRY EQUITY HOLDERS:A STUDY OF FIN BANK PLC AND UBA PLC
1.1 BACKGROUND OF THE STUDY
The electronic method of payment or e-payment (e-commerce) has taken a centre stage in economic activities of countries of the world. In its bid to catch up with this trend in the world, Nigeria has adopted e-commerce.
Investment in recent time, in the Nigeria capital market and in the banking industry appears to be taking its shape, especially when considered along the new lease of life. The Securities and Exchange Commission (SEC) seems to be injecting into the operation of the market and even the recapitalization exercise that was carried out in the banking industry.
The market before now was regarded as a place where only the elites in the society call the shot, but it is now being used as a variable factor in measuring the growth and development of nation around the globe. (www.business.com 2008)
Operation I the Nigerian Capital market have witnessed a lot of transformation, both in human and infrastructural development. The Nigerian Stock Exchange (NSE) being a self regulatory organization, in a space of time has eroded the elite cliché associated with the market and made it all corners affairs. Notwithstanding the Nigeria Stock Exchange goals and objectives of ensuring that every Nigerian has bile of the goodies in terms of returns on investment that flow from having a stake in the market, some structured guidelines in the affairs of the market as it relates to investors appears as if the investors were being done a favour for approaching the market for investment. With the recent security exchange commission directives that all registrars of Companies in the country should no longer hold brief for their parent company or any organization, they have close affinity with and coupled with the E-dividend option recently launched, investor’s prayer of a virile and transparent market operations may have finally come to be.. It will be recalling that as at September 2007, though with the alleged connivance of registrars, a sum of
N19billion unclaimed dividend was still variously being held in the coffers of both quoted and unquoted companies and that the money was being ploughed back into the owner’s account as profit.
(www.business.com 2007), attempts has been made in the pat by SEC to float a trust fund to help manage the huge unclaimed dividend but this was vehemently oppoed by the investors in the market.
The Security and Exchange Commission’s decision to launch the e-dividend at this time in the history of the country is a move towards attaining its vision of being among the 20 most developed economics in the world by 2020 and it serves a positive tonic to both local and international investors to now have a rethink on the workability of corporate governance policy in the country. (See e-dividend – option news of 17/03/2005).
E-dividend as an option is a means where by an investor’s account is credited electronically whenever a transaction is carried out for him/her in the market. E-payment system is applicable to the banking industry which means paying directly into the account of the beneficiary. Other advantages as it is obtained in other jurisdiction where e-dividend option and e-payment system have been adopted are that it will enhance the capital market liquidity; shareholders will have their money to reinvest on time; payment is being affected immediately; it reduces delay; enhances good cooperate governance; eradicates the era of quoted companies declaring dividend when in the actual fact they do not have cash on ground to pay.
According to the ministry of finance, on his open speech says ‘with the introduction of the e-dividend, the commission has further shown serious commitment in removing some constraints in dividend payment in the areas of eliminating unclaimed dividend. Warrants delay in depositing dividend warrants into current or saving account, dividend warrants lost due to change of address, incomplete address, poor and inefficient dispatch procedures and delay in receipt of dividend warrants.
1.2 STATEMENT OF THE PROBLEM
Dividend which is the main stay of the Nigerian investors on investment, prior to the discovery of Nigeria Stock Exchange has been in jeopardy (www.business.com 2007).
Despite the concerted efforts by successive Nigerian government that is Nigeria Stock Exchange (NSE) and Security and Exchange Commission (SEC), the situation has not changed much. Dividend continues to contribute les than what it is expected of it in lifting dividend policies from its deplorable is yet to yield the desired results.
Below are some of the problems that justify the researcher in embarking on the impact of e-dividend payment to equity holders of the Nigeria banking industry
- The issue of unclaimed dividend is ramped.
- The issue of unclaimed dividend is also the main stay back on investors.
- An average Nigeria investor has small holding and various needs and problems
- There is also the issue of clearance on the declaration of the said dividend.
- Operations of the Nigeria Stock Exchange are confined to well known locations, persons, companies and therefore do not extend to wide geographical areas, all these have resulted in problems to this sector
1.3 OBJECTIVES OF THE STUDY
The study seeks to achieve the following set objectives.
- To evaluate the impact of E-dividend payment system to investors or equity holders.
- To identify constraints that militates against efficient and effective declaration of dividend
- To suggest possible ways of enhancing the effective and efficient ways of enforcing good dividend policies.
1.4 RESEARCH QUESTIONS
The study seeks to answer the following questions.
- What are the expected impacts of electronic dividend payment to equity holders?
- What are the problems associated with e-dividend payment?
- What is the importance of electronic dividend payment to equity holders in banking industry?
1.5 SCOPE OF THE STUDY
This study is geared towards evaluating the impact of e-dividend payment to equity holders of Nigeria banking industry; it is also within the scope of the study to investigate the roles of NSE and Sec in the development of e-dividend payment. It will also examine the policies on the e-dividend and also view whether it meets the prescribed minimum or not.
1.6 HYPOTHESES OF THE STUDY
(I) The impact of E-dividend to the equity holder is not encouraging.
(II) E-dividend payment does not reduce the issue of unclaimed dividends.
(III) E-dividend payment does not enhance the effectiveness and efficiency of dividend payment to equity shareholders.
1.7 SIGNIFICANCE OF THE STUDY
Research as the process of arriving at dependable solution to problems through the planned and systematic collection, analysis and interpretation of data, this would enable the researcher to fish out the unknown as regards to the issue of the impact of e-dividend payment to equity holders of Nigeria banking industry, and in so doing more would be known about this particular issue.
It also serves as a source of information especially to research students who may wish to undergo more research on the said topic. Through this study, the researcher would be able to arrive at dependable solution and conclusion to this problem and make recommendation of meaningful contribution towards the equity holders, Nigeria Stock Exchange (NSE), Security and Exchange Commission (SEC), Banks and even to the general public.
1.8 OPERATIONAL DEFINITION OF TERMS
Bank: – Banks are financial institutions responsible for mobbing out excess fund
and giving it out to customers
Capital Market: – This is a market that deals on long-term financing.
Equity Holders: – These are the owners of a company’s shares or properties.
E-Dividend: – This is a means where an investor’s account is credited electronically whenever a transaction is carried out for him/her in the market