The effect of dividend policy on share prices of companies listed at the Nairobi securities exchange

Abstract

This study attempts to explain the effect of dividend policy on share prices of companies listed at the Nairobi Securities Exchange. A census of all the 61 listed companies from the Nairobi Securities Exchange was examined for a period of 10 years from 2004 to 2013. This study was limited to companies that were listed for the whole period of 10 years. This study was facilitated by the use of secondary data extracted from annual reports of companies obtained from the Nairobi Securities Exchange. The empirical estimation was based on regression analysis of the relationship between dividend policy and share prices for listed companies after controlling for earnings per share and debt equity ratio. The independent variables were dividend payout ratio, earnings per share and debt equity ratio. The study established a positive relationship between share prices and dividend policy. From the results we conclude that dividend policy has a significant effect on the share prices.