The Relationship Between Dividend Payout And The Value Of Companies Listed At The Nairobi Securities Exchange
Abstract
The objective of this study was to find out the correlation between dividend payout and
the value of companies quoted at the Nairobi Securities Exchange. The dependent
variable was the value of the firms, the independent variable was the dividend payout and
the control variables were profitability, capital structure and size of the firm This study
reviewed Dividend Irrelevant Model, Dividend Relevance model, Bird in the Hand
Theory, Information signaling effect theory, Tax Preference Theory and Clientele Effect
Theory. The study population was all the 65 listed companies at the Nairobi Securities
Exchange as at 31st December 2016 and the study sampled 16 firms from almost all the
sectors apart from insurance and telecommunications. The study period was five years
from 2012 to 2016. Regression and correlation models were used. Strata software was
used to analyze data. The study found out that companies that pay high dividends are
highly valued in the market than firms that do not or pay low dividends. The study also
found out that dividend payout, profitability and size of the firm had a positive
relationship with the value of the firm. The study also found out that dividend payout had
the strongest positive correlation followed by profitability and the size of the firm had a
very small positive correlation with the value of the firm. On the other hand an increase
in the capital structure resulted to a negative correlation with the value of the firm. The
study found that an increase in the amount of debt in capital structure resulted to a
decrease in the value of the firm. The results of the study supported the dividend
relevance theory which states that investors are influenced by the dividend policy of a
firm
Publisher
University of Nairobi
Subject
Nairobi Securities ExchangeRights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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