Effect of Dividend Payout on Value of Firms Listed at the Nairobi Securities Exchange

Abstract

Dividend payment has been more popular in the past half-century as companies seek to increase their value in today's interconnected society. There have been claims in regard to paying dividend does not impact valuation of company, however this argument has been debunked since it is based on the premise of perfect markets. Other proponents of dividend payments argue that paying dividends may increase the value of a company. This study aimed to ascertain if dividend payout impact on the valuation of NSE-listed companies. The study's population consisted of all 63 NSE-listed businesses. Dividend payout was evaluated using the dividend payout ratio, leverage was measured using the debt ratio, managerial efficiency was measured using the ratio of total revenue to total assets, and company size was calculated using the natural logarithm of total assets. The dependent variable was firm value, which was calculated by dividing book valuation of equity and market valuation of equity. Secondary data was collected yearly throughout a five-year period (January 2016 to December 2020). The study used a descriptive cross-sectional research methodology, with multiple linear regression used to determine the connection between the variables. The data was analyzed using the SPPS program. The analysis yielded an R-square value of 0.138, indicating that the independent variables studied can explain 13.8 percent of the changes in the value of listed firms on the NSE, while the remaining 86.2 percent of the changes in firm value is attributed to variables outside the scope of this study. It was also discovered that the study's independent variables were modestly associated with the business value (R=0.371). The F statistic was significant at the 5% level with a p0.005 in the ANOVA results. As a result, the model proved adequate in explaining the relationship between the variables. Dividend payout, company size, and management efficiency all produced positive and statistically significant results, while leverage produced positive but not statistically significant results for this research. This research suggests that listed companies should increase their dividend payment, asset levels, and managerial efficiency since these factors have a substantial beneficial impact on company value. Future research should concentrate on the variables that affect dividend payments among publicly traded companies, according to the report.