| dc.description.abstract | The objectives of this research were firstly, to find out factors
managers consider when making decisions to declare stock
dividends and secondly, to establish if shareholders gain from such
declarations, in terms of increased dividends. In order to achieve
these objectives both primary and secondary data were used. The
information for the first objective was obtained by the use of a
questionnaire, which was completed by 22 companies. For the
second objective, the sample comprised 62 bonus issues made
during the period 1994 to 1998, derived from annual reports of the
companies in this study.
The study identified six important factors that managers of
companies listed at Nairobi Stock Exchange consider before
issuing bonus shares. These are: cash conservation, giving
recognition that some retained earnings have been permanently
committed in the firm, creating greater interest in the firm's share,
broadening of shareholders base, correcting -o.f a situation where retained earnings have grown disproportionately large in relation to
capital contributed by shareholders and signaling better future
prospects.
On the second objective, the study established that shareholders
gain from stock dividends in terms of increased cash dividends.
The average increase of 10.23% experienced during the period
covered by the study was found to be statistically significant.
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