The relationship between dividend changes and subsequent period earning changes of saccos in Kenya
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Date
2011-11Author
Thiga, Elizabeth W
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Dividend policy is a very important aspect of financial management but remains as the ten
important unresolved problems in finance. This is because it affects such areas as the financial
structure of the firm, the flow of liquid funds, liquidity and investor satisfaction. Not only do
managers show extra care in their payout decisions, especially in changing payout decisions, but
also the markets react strongly to dividend changes, and more so, to dividend omissions and
initiations.
The purpose of this paper was to study the relationship between dividends changes and
subsequent period earnings changes of SACCOs in Kenya. This research involved the use of a
descriptive survey. The target population of this study consisted of 4233 SACCOs registered
under the Societies Act in Kenya. The SACCOs were selected using Systematic random
sampling method. Nairobi was selected as it is the center of SACCO activity as about 40% of all
registered SACCOs in the country are found here. In this study emphasis was given to secondary
data which was obtained from the financial results filled at the ministry of cooperative and
development. The data included the actual dividend paid by the SACCOs and financial
statements data over five year period of 2005-2009. Regression analysis model was used to test
the data.
The study concluded that there is a positive relationship between dividend changes and
subsequent period earnings change in the dividend payment year and previous years but only a
significant though modest relationship between dividend change and subsequent year‟s earnings.
The study also concludes that managers only incorporate their expectation of earnings in
relatively shorter time when changing dividend payment. This is due to various uncertain factors
which may prevent managers from incorporating longer future into consideration into financial
decisions thus they prefer to use a short time period to raise feasibility
Sponsorhip
University of NairobiPublisher
School of business