Effects Of Dividend Policy On Financial Performance Of Listed Commercial Banks In Kenya

Abstract

The purpose of this research was to establish the impact of dividend policy on the financial performance of the 10 listed commercial banks in Kenya. The research used secondary data obtained from banks audited financial statement. To achieve this objective data from 10 listed commercial banks was analysed for the period of five years (2011-2015).The research was a census study and it adopted a descriptive design. This design fitted the study that aimed to determine the association between dividend policy and financial performance variables (Asset quality, capital adequacy, liquidity management and size).Regression was used to show the effect dividend per share, asset quality, capital adequacy, liquidity management and size on the financial performance and correlation analysis was employed to determine the association of the factors in the model. The research findings showed that total asset and capital adequacy had a weighty affirmative influence on the financial performance of the listed commercial banks while asset quality and dividend per share had no effect the return of assets of listed commercial banks. From the research findings, the study recommends that commercial banks and other sectors should invest in profitable assets that will yield higher returns in the future to enhance their financial performance and attract more profitable investments. The study further recommends that investors that should not determine the financial performance of the firms based on the dividend paid since there is insignificant relationship between DPS and financial performance. A similar study should be carried out on both listed and unlisted commercial banks in Kenya and for longer period of time such as 10-15 years. Further research on factors affecting financial performance of listed commercial banks could contribute to body of finance knowledge.