Effects of Capital Structure on Dividends Pay-out Ratio Amongst Non-financial Firms Listed at the Nairobi Securities Exchange,Kenya

Abstract

The study analyzed the relevance of a firm’s capital structure to the dividend payout ratio for publicly traded firms providing non-financial services and products on the NSE in Kenya. Capital structure decisions have a vital role to play in the success of companies, in both their activities and in dividend decisions. The report used a descriptive design and used data obtained from secondary tools in the research. The reference population was a total of 40 publicly-listed non-financial companies by the end of 2019. Data were obtained from secondary sources on the Nairobi Stock Exchange and annual reports were released on corporate websites for a period of 10 years from 2010 to 2019. The survey was conducted to assess whether the dividend payment ratio, as described in the dividend policy adopted by firms operating in the non-financial firms on the NSE list, is significantly affected by the structure of the capital of the company. The capital structure consisted of three factors, retained profits, long-term debt, and equity capital. Control variables were studied to ensure a minimal bias on the variables studied, including market capitalization, price-to-book ratio, share price, and asset return. The thesis used the STATA statistical program for data analysis, including a description of data, correlation, and regression analysis. The results of the analysis validated previous research on dividend policy and capital structure, which backed the claim that there was no substantial connection between the dividend payout ratio and the company's capital structure. The findings of the analysis are shown in the tables. The study suggests that companies implement sustainable dividend policies, balancing dividend payments with other competing interests that can take over the capital of firms