Factors Influencing Dividend Payout of Firms Listed at the Nairobi Securities Exchange, Kenya

International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue IV, April 2022 | ISSN 2454–6186

Factors Influencing Dividend Payout of Firms Listed at the Nairobi Securities Exchange, Kenya

Sang Bernard Cheruiyot, Dr. Kenyanya Patrick Nyatete, Ph.D., Dr. Oluoch Oluoch, Ph.D.
Department of Accounting and Finance, Jomo Kenyatta University of Agriculture and Technology, Kenya

Abstract; While various factors influencing a firms’ dividend policy have been evaluated by researchers, the outcome of these studies has not entirely resolved the controversies linked to dividend decision. There is little information on factors affecting dividend payout in different sectors among the listed firms in the NSE. The main objective of this research was therefore to establish the effect of defined firm characteristics on dividend policy of firms listed at the Nairobi Securities Exchange. The specific objectives of the study were to establish the effect of size on dividend payout policy of firms listed at the NSE, to evaluate the effect of leverage on dividend payout policy of firms listed at the NSE, to determine the effect of growth on dividend payout policy of firms listed at the NSE, and to establish the effect of liquidity on dividend payout of firms listed at the NSE. This study was based dividend irrelevance theory, dividend relevance theories of the bird at hand. This study employed the explanatory survey research design and the target population of this study was all 64 listed firms in the NSE for the five-year period of 2016 to 2020. The study collected data from 32 firms whose data was complete for the entire period of study. This made 160 observations. The study utilized secondary data which from the NSE handbooks. The data collected was analyzed using descriptive and inferential statistics. Regression results show that; firm size has a positive significant effect on dividend policy of firms listed at the NSE; leverage affects dividend policy negatively and significantly; firm growth has a positive significant effect on dividend policy; and that liquidity has a positive significant effect on dividend policy. The results from the research may benefit potential investors in deciding which sector to invest in. Future researchers in the area of dividend policy may also find results from this study important as it may lay a foundation to their studies.

Keywords: Dividend Payout, Firm age, Leverage, Firm Size, NSE, Kenya

I: INTRODUCTION

All investors expect a certain amount of return on their investment for the risk taken. Firms can allocate profits to their stockholders either through dividends or share repurchases. Investors can get a return on their investment through dividends (current income). Alternatively, if a company has a lucrative investment opportunity available, it may not distribute its profits. The outlay in a profitable venture will also increase the value of a company, resulting in capital gains (future income) to investors. Theoretically, both dividend payout and retention lead to shareholder wealth maximization. Thus, as concluded by [1], investors should not differentiate among dividends and retaining profits. However,

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