An evaluation of miller and Modigliani dividend policy irrelevance theory in selected firms in the Cameroon telecommunication industry

Abstract

This study empirically evaluates the claim that dividend policy is irrelevant in selected companies in the Cameroon telecommunications sector. Time series data for sixteen years (2007-2022) was gotten from the financial records of the studied companies (Orange and MTN). The market price of a share was modelled as a linear function of dividend per share, dividend yield, dividend payout ratio and retention ratio. The Auto-regressive Distributed Lag (ARDL) model is applied in the investigation. According to the findings, dividend per share has a positive significant short-and long-run effect on the share price. Dividend yield has a short-and long-run negative and significant impact on share price. The research concludes that dividend policy influences share price. Therefore, the argument made by Modigliani and Miller that dividend policies are irrelevant is false in telecommunication companies in Cameroon. Hence, the study suggests that companies in the telecommunication sector adopt a constant dividend payout ratio policy.