Effects of Dividend Policy on Stock Prices for Banks Listed at the Nairobi Securities Exchange

Abstract

Dividend policy is a strategy used by a company to determine the amount and timing of dividend payments. The dividend policy adopted by an organization is one of the important issues in corporate finance as it may have an impact on the firm’s value and shareholder wealth. The research study is an attempt to analyze the effect of dividend policy on shareholder wealth of eight banks listed and traded at the Nairobi Securities’ Exchange (NSE). For the purpose of this study the financial data from the period 2013-14 to 2017-18 of the eight banks would be used. The data would be analyzed using statistical tools such as multiple regression technique, t test, the coefficient of determination (R2) and F-Value. The dependent Variable used is Market Value of shares to be regressed against the independent variables: - Dividend per share, Return On Assets which is a proxy for profitability and Leverage measured by Debt- Equity Ratio. The results of the data analysis will determine whether there is a significant effect of dividend policy on the share price of the eight listed Banks. The study is limited to a time period of 5 years and eight banks listed at NSE.