Survey refers to a method of data collection that utilises questionnaires or interview techniques for recording the behaviour of respondents. Ghuari and Gronhaug (2002) noted that surveys are an effective tool to get opinions, attitudes, and descriptions and investigate cause and effects relationships. The evidence using survey research methodology, such as questionnaires or interviews complements and provides a check on the purely econometric research on dividends.
The questionnaire is the most popular method of gathering information in social science research (Howard and Sharp, 1983). This popularity arises mainly from the relatively large sample of a population that can be consulted about their views on a particular issue and the ease with which a questionnaire can be distributed. A questionnaire is a means of obtaining data that are not already available in written or electronic form, or cannot be easily obtained by observation (Fair et al., 2003). To de Vaus (2002), a questionnaire is a method of data collection in which respondents are asked to respond to the same set of questions in a predetermined order. Data generated through the administration of a questionnaire is referred as primary data. A questionnaire therefore provides an efficient way of collecting responses from a large sample of a population prior to quantitative analysis.
Despite the advantages of survey research, there is no prior survey research on dividend policy in Nigeria. The main line of research on dividend policy in the Nigerian equity market relies heavily on economic modelling approaches, such as the use of aggregated regression
129
analysis and other statistical methods in the investigation of the determinants of dividend policy. Thus, there is no understanding of how managers perceive dividends in Nigeria. Moreover, most of these studies were conducted more than 30 years ago. As chapter 2 clearly pointed out, various changes have taken place in the Nigerian investment climate since the return to democratic governance in 1999. For example, the new civilian government has removed all the unfavourable laws that hitherto limited foreign investment in the country. These changes have led to unprecedented growth in inward foreign direct investments to the country. Given this growth in inward foreign direct investments, it is worthwhile to carry out a study on the perspectives of Nigerian managers on dividend policy. Given the dearth of dividend surveys in Nigeria, the questionnaire was considered useful as an instrument for data collection in this study.
4.5.1.1 Questionnaire Design
The aim of the questionnaire survey in the current study is to investigate the factors that drive dividend decision and the relevance of dividend policy to firm value in Nigeria. Specifically, the questionnaire sought to ascertain the perceptions of Nigerian corporate managers on the: (i) factors influencing dividend policy; (ii) dividend setting process; (iii) relationship between dividend policy and firm value; and (iv) four main explanations for paying dividends. The questionnaire also sought information on the administration of dividend policy in Nigeria.
A very important and crucial step in a questionnaire survey is its design. This is because a well-designed questionnaire engages the respondents and encourages them to answer the questions honestly and accurately. A sensitive decision to make in the design of a questionnaire is the choice between open-ended (primarily qualitative) and close-ended (primarily quantitative) questions. Research methodology experts suggest using close-ended questions, because such an approach encourages respondents to reply and also helps the researcher to code the information easily for subsequent analysis (Saunders et al., 2009; Sekaran and Bougie, 2009). In the current thesis, the close-ended questions was adopted to ensure the comparability of the data collected and also to allow the data to be analysed quantitatively. Other factors which influenced the choice of close-ended questions in this study is to reduce the time for data analysis and to increase the response rate, as it would
130
be less demanding on the time and efforts of respondents. However, four open-ended questions were included to gain additional in-depth data.
Experts in research methodology have also suggested several possible actions to be taken in order to reduce possible problems with a questionnaire and minimise any resulting bias in the research. Hiar et al. (2003) noted that researchers must pay attention to the length of the questionnaire as well as the manner in which the questions are structured, sequenced, and coded, in order to achieve a high response rate. In a similar vein, Dillman (1978) suggested that the questionnaire should not appear unnecessarily bulky and that sensitive questions should be avoided so that the target respondents would not ignore the document, while Jobber and O’Reilly (1996) suggested that researchers should offer incentives to respondents in order to increase the response rates. Finally, the response rates to a questionnaire can be improved by careful attention to a range of factors including questionnaire appearance, length, content, delivery methods and associated communication as well as being clearly worded and well laid out (Saunders et al., 2009).
Consequently, the researcher took various issues into consideration in the design of the questionnaire for the current thesis:
(i) The accompanying cover letter assured potential respondents’ companies of their anonymities as no company details will be divulged;
(ii) The questions were kept as short as possible and to the point to avoid errors in responses;
(iii) The length of the questionnaire was kept to only 4 pages to ensure the document was not time consuming for the respondents;
(iv) Ambiguous words were avoided to ensure the respondents understand the questions and answer in a clear fashion;
(v) Sensitive questions were avoided in order to ensure that a higher response rate would be achieved;
(vi) The questionnaire was accompanied by a stamped self-addressed return envelope to ensure that respondents do not incur any mailing expenses; and (vii) Incentive was offered to all respondents by way of an executive summary of the
131
free draw for a case of champagne if the completed questionnaires were returned by a fixed date.
The initial review of the dividend literature revealed a number of issues within the area of research. The questions included in the initial draft of the questionnaire were prepared drawing heavily upon the literature reviewed in chapter 3. Some of the original questions were adopted from previous surveys on the behavioural aspects of dividend policy conducted in the US (Baker et al., 1985; Baker and Powell, 1999; Brav et al. (2005), in Ireland (McCluskey et al., 2003), in the UK (Dhanani, 2005), in Canada (Baker et al., 2008) and in the UAE (Chazi et al., 2011). The final document was adjusted to reflect the Nigerian economic environment, most especially its distinctive taxation system.
4.5.1.2 Pilot of the Questionnaire Survey Instrument
Apart from taking into consideration the issues enumerated above regarding the design of the questionnaire as well as incorporating the previous literature on dividend policy, extensive consultation took place prior to the administration of the questionnaire regarding the content of the statements to be included in the questionnaire and on the overall layout of the document. A pilot study was undertaken whereby an early version of the questionnaire was administered to 12 Chief Financial Officers (CFOs) from the stock brokerage firms in Nigeria and to 8 senior academics at the Lancashire Business School of the University of Central Lancashire in April 2012. The main purpose of this pilot was to seek feedback on the clarity, validity and appropriateness of the questions and questionnaire design, and to determine the average amount of time required to complete the questionnaire (Saunders et al., 2009).
Thirteen pilot questionnaires were received, out of which 12 were completed. Of the 12 completed questionnaires, 7 came from the CFOs, while the remaining 5 were from the academics. The two respondents that returned their questionnaires uncompleted indicated that they did not complete the questionnaire because it was not really relevant to their companies since they not pay dividends. Analysis of the feedback from the respondents suggested that the questionnaire was slightly too long for some respondents (especially those from the CFOs). The complexity of the questionnaire was also a little off putting to some respondents. Also, the pilot respondents confirmed that the average time taken to
132
complete the questionnaire was 15 minutes. Therefore, it was decided that the questionnaire structure needed to be refined and the length of some questions shortened. In the light of the feedback, the questionnaire was redesigned and various other modifications were made to the final version of the survey instrument. In addition, to ensure the validity and reliability of the responses, the re-drafted questionnaire survey instrument was also sent to the researcher’s supervisory team for review before mailing it to the prospective respondents.
4.5.1.3 Administration of the Questionnaire
The questionnaire survey instrument was administered in conjunction with the NSE. This decision was taking considering the fact that the research was conducted in an emerging market where individuals are less-inclined to reply to a questionnaire due to the fear that the information provided might be misused. The researcher informed the management of the NSE about the research and sought its support to ensure the success of the research. Specifically, the Exchange allowed the inclusion of a paragraph in the covering letter referring to its support for the study. The researcher further assured the respondents of the anonymity of their companies and also promised to send them an executive summary of the results upon completion.
The final version of the questionnaire survey instrument was divided into four main sections.12 Section 1 comprised 10 close-ended questions and one open-ended question seeking the views of the respondents on the factors that influence the dividend decision of their companies. Section 2 asked the respondents questions dealing with the dividend setting process and the relationship between dividend policy and firm value; this section included 11 close-ended questions and one open-ended question, divided into panel A and B. Section 3, which comprised 13 close-ended questions, sought the views of the respondents on the four standard theories that explains why firms pay dividends (i.e. signalling, tax preference, agency, and the bird-in-the-hand explanation). Section 4 obtained background information regarding the respondents and their companies (i.e. the most influential in developing the dividend policy of their companies, the respondent’s position in the company, the company’s main activity, whether the company pays a dividend or not,
12
133
etc.). The responses in section 4 facilitated the classification of the respondents into financial and non-financial firms, which enabled the researcher to examine any substantive differences in the responses between the two.
Self-completed questionnaires can be administered to the potential respondents through three different mediums: through the mail, personally administered, and electronically (internet) distributed. Considering the target population which comprise of all listed companies in Nigeria, the internet or postal questionnaires were preferable to personally administered questionnaire. However, the use of the NSE’s database facilitates the use of postal questionnaires since this database contains the full postal addresses of the listed companies, but not necessarily all email addresses. Although e-mail would have been cheaper and faster to use, but sending hard copies was expected to attract more attention and thus increase the response rate. This thesis therefore employed the postal questionnaire to administer the survey document to the target respondents.
Since Nigeria has a relatively small and emerging stock market, the questionnaire was targeted at the entire population of listed companies. However, only companies that were listed on the Nigerian stock market on or before six months to the time of the distribution of the questionnaires and have their complete postal addresses at the Exchange’s website were included in the sample. The questionnaires together with a covering letter requesting participation in the study were first mailed to each of the 191 companies listed on the NSE in mid-June 2012, addressed personally to the Chief Financial Officers (CFOs).13 The covering letter from the Institute of Global Finance and Development (IGFD) of the University of Central Lancashire on their headed paper explained the purpose of the study and urged their cooperation. The lists of the companies’ addresses were obtained from the NSE’s website. The second rounds of the questionnaires were mailed to the non-respondents in mid-August to reduce potential non-response bias and to increase the response rate.