Effect of working capital management on the dividend payout of firms listed at the Nairobi securities exchange
Abstract
The art of balancing profitability and firm liquidity mostly determine the failure or
success of a firm by how well it manages its disposable resources and how efficient a
firm is with regards to managing operations of the firm. When a firm has an over
investment in working capital it results to too much of the firm finances being
committed thereby necessitating a firm to fund its operations using external borrowing
that is costly while on the contrast under investment in working capital result to lower
returns and slowed growth. With regards to the aforementioned, WCM may either acts
a deterrent or a trigger to dividend payout and by using it as a study variable will aid in
assisting to know the optimal financial decisions and practices of liquidity management.
“The aim of this study was to ascertain the effect of WCM on dividend payout of firms
quoted at the NSE. The population for the study was all the 63 companies quoted at the
NSE. The independent variables for the study were WCM measured using current ratio,
leverage represented by debt ratio, profitability represented by return on equity and firm
size as represented by the natural logarithm of total assets. Dividend payout was the
dependent variable and was represented by dividend per share dividend by earnings per
share. Secondary data was acquired over a five-year time frame (January 2015 to
December 2019) annually. Research design for this study was descriptive crosssectional
design while multiple linear regression was applied in determining the
relationship between the variables. SPPS software was employed in the analysis of data.
From the analysis an R-square value of 0.126 was produced which in other words mean
that 12.6% of the changes in the dividend payout of listed firms at the NSE can be
described by the independent variables studied while the other 87.4% in the changes in
dividend payout is affiliated to other variables that outside the scope of this study. It
was further found out that independent variables of this study weakly correlated with
the dividend payout (R=0.355).” ANOVA outcomes revealed that the F statistic was
significant at 5% level with a p<0.05. Henceforth, the model was appropriate in
explanation of the association between the chosen variables. The findings also showed
that profitability and firm size generated positive and statistically significant values.
WCM and leverage generated positive but statistically insignificant values for this
study. This study recommends that listed firms should enhance their profitability and
their asset levels as this has a significant positive effect on dividend payout of listed
firms. The study also recommends the need for future studies to focus on other factors
that influence dividend payout among listed firms.
Publisher
UoN
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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