Factors Affecting Dividend Smoothing Among Listed Firms at the Nairobi Securities Exchange

Abstract

It is not well understood why corporations settle their payouts or what factors affect patterns in corporate performance, despite dividend smoothing's widespread use and significance. It has been and will continue to be crucial in the field of financial management to identify the elements that influence the optimal dividend distribution and dividend smoothing. Variations in currency rates and an increase in the number of corporations paying dividends are two variables that affect dividend payouts. The purpose of this research was to identify the aspects of dividend distribution that are unique to firms listed in Nairobi. The purpose of this research was to examine the role that various elements play in the dividend payment procedure for Nairobi-listed firms. The dividend distribution procedure will also examine the profitability and leverage of the enterprises involved. Multiple theoretical and experimental approaches were utilized in the project. Dividends, agency theory, and signaling theory will all play significant roles. In particular, it will focus on Nairobi Stock Exchange businesses that have distributed dividends since 2017. The data was analyzed with the use of a systematic sampling strategy. The NSE manual was mined for information between the years of 2010 and 2021 for the purpose of this study. Both descriptive and inferential statistics will be used in this investigation. Statistics like mean, standard deviation, maximum, and standard error are employed in the first method. In the latter, linear regression and correlation analysis plays a role. Autocorrelation, multi-collinearity, and linear regression are only some of the statistical methods that will be used to examine the data. To what extent profitability and a streamlined dividend procedure are related was the focus of this study. The article also delves into the question of whether or not dividends are affected by the concentration of corporate ownership. Examining whether or not leverage contributes to dividend cuts is another focus of the research. Academics, management consultants, and those in charge of policing the capital markets can all benefit from the study's conclusions. Results revealed an R-square of 0.345, therefore profitability explain 34.5% of the variation in a dividend smoothing. The ANOVA revealed an F-ratio of 32.588 which was significant at 0.05 (P-value=0.001< 0.05). Therefore, a profitability is a significant predictor of dividend smoothing. There was a favorable correlation between the ownership structure and dividend smoothing. This indicates that the dividend smoothing of the companies under study was determined by ownership structure, as indicated by the number of directors who are shareholders. As a result, the dividend smoothing of the companies under study is determined by the size of the firm, sales (profits), and growth rate of the companies.