Effect of Corporate Governance on the Dividend Payout Ratio of Commercial and Service Firms Listed at the Nairobi Securities Exchange

Abstract

Various theories have indicated that the goals and ideas that business leaders emulate have a propensity to differ; they are contrary to their individual interests and this has given rise to corporate governance which is said to minimize the spill over. Research studies undertaken on organizations with renowned exemplary corporate governance norms support that there is a positive impact to the way such companies are performing and in essence the dividend payment. A research was set to determine the how governance in the corporate sector affected dividend payout ratio of various organizations that are NSE listed. All 12 commercial and service organizations listed formed population of this work. Independent variants in this research were corporate governance operationalized as how many members the board has, team independence and how frequent they meet. Standard variants were profitability represented by return on equity per year, cash balances represented by the rate of money in flow to total asset and debt financing, evaluated by ratio of complete debt to entire expenses on a yearly rate. Changing variant was the rate of dividend due to be paid represented by share on dividend to gains per share. A five-year period, January 2014 and December 2018, was studied through gathering of secondary data. Different research design methods were employed while multiple linear regressions model was applied in analysis of the association between the variable. The data was analyzed by use of SPSS version 22 and 0.624% value of R-Square was produced from the study results which meant that a large percentage, 62.4%, of the disparity among the payable rates of dividends of commercial and service organizations listed at the stock exchange can be explained by the six constant variants as 37.6 of disparity of dividend payout rate was related to variables that were not part of this study. Findings of ANOVA highlight how F was important at the 5% level, showing p=0.000. Henceforth, this case showed how appropriate in explaining the correlations between the differing variants. In addition, it was revealed that board size and profitability created a good case for this research while board independence, cash balances and debt financing produced good but insignificant findings for this research work. Finally, board meeting produced a negative but not statistically influence on the rate of money paid among commercial and service organizations that are NSE listed. This research suggests that strategies should be set to so raise the numbers of members who seat in the board and profitability, because these measures have a big effect on how dividends get paid among NSE listed organizations.