Effect Of Ownership Structure On Dividend Payout Of Listed Firms At The Nairobi Securities Exchange

Abstract

Ownership structure leads to agency problems since majority shareholders have high levels of incentives hence they monitor the actions of the management and influence decisions. There has been a growing debate on whether ownership structure impacts on management decisions especially dividend policy decisions. The objective of this study was to determine the effect of ownership on dividend pay-out of listed firms at Nairobi Securities Exchange. The study employed correlation analysis and panel regression analysis in establishing relationship between types of ownership structures and dividend pay-out. This research was anchored by agency theory and utilized a cross-sectional descriptive research design. The population comprised of 67 listed firms as at 31st December, 2017 that were operational in the study period. Secondary sources of data spanning for a period between 2012 and 2016 were used. Diagnostic tests and descriptive statistics were carried out afterwards inferential statistics: correlation analysis and regression analysis were applied in hypothesis testing. The study found that dividend pay-out and firm profitability increased rapidly over the study period. Debt and firm size recorded a gradual increase while ownership structures (institutional, managerial, state and foreign) recorded a slow increase over the study period. There lacked any correlation amongst ownership structures (institutional, managerial, state and foreign) and dividend pay-out. Likewise, there lacked any correlation amongst ROA, debt, firm size with dividend pay-out. Regression outcome found that coefficient of determination was 6.6%, implying that the regression model used was a poor predictor. However, analysis of variance was 0.0063; implying that it was statistically significant. Firm profitability, firm size and institutional ownership were related positively to dividend pay-out while debt was negatively related. Institutional ownership, debt and firm profitability were found to be insignificant while firm size was significant.