Effects of Monetary Policy on Dividend Payout of Banks Listed Nairobi Securities Exchange

Abstract

Monetary policies are paramount in shaping the economic well-being of any country. The formulation of policies is strategically for the futuristic survival and sustainability of the business and the economy. The main objective this study was to determine the effect of monetary policies on the dividend payout. The shareholders have also expected for high dividend payout as an indication that corporate governance is maximizing the shareholders’ wealth. The research utilized secondary data from 2016-2019. The integral determinants were Repo Rate, Central Bank Rate, and 91-Day Treasury Bill Rate. The theories anchoring this research were Liquidity preference theory, pecking order theory and life cycle theory. The census was undertaken since all the commercial banks listed in the NSE were studied. The quantitative descriptive research design was integral method useful in this research. The SPSS was utilized to build the foundation of this research. The research assessed and found out that the regressed variable was dividend payout and correlated with the predictor variables such in Repo Rate, Central Bank Rate, and 91-Day Treasury Bill by negative 49.6%, negative 2% and positive 79.6% respectively. The research indicated that 91-Day Treasury Bill was significantly correlated with dividend payout by 79.6%. The research recommended for further consideration of macroeconomics factors since they were not exhaustive in this study. The multicollinearity test was done using Variance Inflation Factors. The findings postulated Repo rate with 1.538, Central Bank Rate 1.044 and 91-Day Treasury Bill at 1.558. This eliminated the assumption that predictor variables were correlated. The multicollinearity was within the normal range and insignificant. In a nutshell, the monetary policies have come of age to transform the economy. The key builders must be addressed to enhance efficiency, effectiveness and to promote economic growth.