| dc.description.abstract | As an alternative to paying cash dividends, a firm may distribute income to its
shareholders by repurchasing its own shares at a premium, through a share repurchase
program. In Kenya, by law, a company is not allowed to purchase its own shares like
in the developed markets where repurchases are legislated and fully supported.
The study aimed at assessing whether there is an empirical justification for
introduction and possible adoption of share repurchases at the NSE. It was a crosssectional
study; the respondents were senior finance executives of NSE-listed
companies. It relied on primary data,which was gathered through questionnaires. Data
was analyzed using factor analysis of Likert-scale type of questions, frequency tables,
graphs, mean score and cross tabulations and standard deviations.
At 88.909% (cumulative percentage)of the total variation in the variables and factors
assessed, the respondents identified share repurchases as an important form of
dividend payout.Premised on the findings of the study, it was established that there is
justification for the introduction of share repurchases at the NSE. Overall, firms’
opinions supported the introduction and adoption of share repurchases at the NSE to
correct the valuation of their shares mainly due to its signaling content; to tackle the
agency/free cash flow problem; and to attain their desired level of leverage among
other financial objectives. The biggest impediment to the introduction and adoption of
share repurchases is the law, which prohibits this form of earnings distribution.
The study recommends that the government should initiate debate via a concept paper
and invite all stakeholders to further air their views on this important topic. This
would lay ground for possible amendment of the law to support share repurchases. | en |
