Effect of Dividend Policy on Shareholders’ Value for Companies Listed at the Nairobi Securities Exchange

Abstract

This research aimed at finding the consequence of financial decision in regard to dividend documentation on shareholders‟ value. The researcher used a descriptive study in carrying out the research. This research design was considered to be appropriate for the study because it shows the relationships between independent variables (dividend policy) and dependent variable (shareholders‟ value) hence through this research design the objective of knowing the consequence of financial decision in regard to payment dividend on shareholders‟ value of quoted companies in Kenya was achieved. The researcher used published financial statements and market survey analysis reports to obtain resultant data that was deemed relevant. Data was analyzed using an acceptable testing tool, account twenty two of SPSS. Test of significance was performed at 95% confidence level. Analysis of Variance and F test determined the significance of the regression representation. The study found out a weak affirmative relationship exists between growth rate, dividend yield and payment rate with shareholders‟ value. Profitability was found to be a study variable that had a strong positive association with shareholders‟ value. Dividend policy is a critical financial decision which should be taken as one of the ways in which a firm can increase its shareholders‟ value. This is based on the study findings that found a constructive correlation between dividend payment rate and dividend yield with residue value. Finance managers need to put into consideration ways of increasing firm‟s profitability since the study found out that increase in firm‟s profit level increases shareholders‟ value by a significant amount. The study also found out that firms need to fully utilize their existing assets rather than acquisition of more assets because though there is affirmative connection between firm‟s intensification in terms of its total net assets with shareholders‟ value. The relationship is weak. The study did not establish the cause of this weak positive relationship and therefore this is a suggestion for further research. Consequently the study did not measure the extent of implementation of dividend policy by companies listed at the NSE. This therefore means that the results of the study might not be of much meaningful help to populace in academia and to those in finance practice. The researcher is therefore suggesting that further studies to be carried out that will measure the index of dividend policy implementation. The researcher is also suggesting that the same study should be carried out again in the future with a condition of availing sufficient time in order to allow thorough analysis of annual reports and also in order to provide sufficient time to gather for the missing data. This might provide further more accurate results.