| dc.description.abstract | Dividend policies are one of the most issues in modern corporate finance. There were
many researchers like Harry DeAngela, Linda DeAngela & Douglas J Skinner who have
provided insights, theoretical as well as empirical, into the dividend policy puzzle.
However, the issue as to why firms pay dividends was as yet unresolved. This paper
examines the relationship between dividend policy and financial leverage of 57 companies, listed with Nairobi Stock Exchange during the period 2008 to 2012. At first, the descriptive statistics for our entire variables were calculated and then correlation matrix was calculated to identify the preliminary relationship among all the variables, followed by regression analysis on panel data to examine the significance and magnitude through fixed and random effects models. Through random effect model the level of corporate debt (leverage), significantly, affected the dividend policy of the firms. On the other hand, financial leverage was found to have a negative impact on dividend payout, indicating less dividend payments by high- debt firms. The findings also revealed that change in earnings has no significant impact on dividend policy while the dividend yield has positive impact and vice versa. Fixed effect model, applied for the study, supports only the significant effect of dividend yield on dividend per share. Fixed effect model indicated that the debt variable and the change in earning cannot be accepted in the confidence level of 95% and the coefficients of the independent variables except the debt ratio have positive Signs. Random effects model showed significant impact of leverage and Dividend yield on DPS but the leverage association was negative with DPS while E in earnings may impact dividend policy under certain circumstances | en |
