This study examined the effects of macroeconomic aggregate on retention ratio of selected quoted manufacturing firms in Nigeria for the period 1981 to 2014. The study used secondary data. The techniques adopted is the Ordinary Least Squares, Error correction mechanism and Autoregressive Distributed Lag (ARDL) Bounds approach to cointegration. The dynamic short run estimate revealed that interest rate exerts a negative influence on retention ratio. The study also found that oil price exerts a positive and significant impact on retention ratio. Further, it revealed that capital market development exerts a positive influence on retention ratio, but financial sector’s development showed a positive relationship with retention ratio, inflation rate appeared with expected negative sign. Foreign exchange rate showed a positive relationship with retention ratio; money supply exhibited a positive influence on retention ratio of quoted firms in Nigeria. The error correction coefficients were significant with the expected sign. Long run relationship among the variables were established. Thus, the study concludes that macroeconomic variables have significant influence on dividend policy. We recommend the need for firms to consider the operating macroeconomic framework in formulating dividend policy
Keywords: Macro, Macroeconomic Variables, Retention Ratio
