ABSTRACT

Dividend policy is the core of a firm's overall policy. It comprises of a series of decisions regarding how the firms distribute profits to their shareholders and include basic contents about the selection of dividend policy, dividend pay-out ratio and pay-out channel etc. Since the dividend policy determines whether to distribute the earnings to shareholders or self-finance through retained earnings, it is an important issue that receives attention these days from both academics and practitioners which is linked to the firms' corporate tax theory (li, Ying-Feng, Song and Man-shu, 2006). Corporate (company) income tax is one of the major sources of revenue to all governments. In Nigeria, it is a factor to be reckoned with within the federal government budget. According to Ola (2005), the taxes so collected come back to the taxpayers in the form of services and to either encourage or discourage some activities in the private sector: though, this depends on whether the policy of the government is towards discouraging or encouraging such companies.