Effect of Firm Size on Dividend Payout Among Non Financial Firms Listed at the Nairobi Securities Exchange

Abstract

Dividend payout is a significant financial aspect since it entails the determination of the sum distributed to the stockholders as return on invested capital to increase the size of the firm. However, the link between dividends and firm size has been an important topic but controversial corporate finance area since Miller and Modigliani conceptualized the dividend irrelevance model. In Kenya, the NSE indicates that any company seeking listing at the bourse must have a clear dividend payout policy. However, due to financial difficulties, various nonfinancial companies have not paid dividends for many years. In 2017 for example, only two companies paid an extraordinary dividend in addition to the usual dividends. This study thus sought to examine the effect of firm size on dividend payout among nonfinancial corporations quoted at the NSE. The study adopted a descriptive research design to achieve its objectives and target population therefore comprised of the 48 non-financial firms quoted at NSE. This study thus undertook a census of the 48 listed nonfinancial corporations. This study entirely used secondary data that was extracted from audited accounting reports of the individual non-financial corporations for a 5 years period from 2017 to 2021. The study employed descriptive statistics and inferential statistics for analysis of data using SPSS statistical software. Descriptive statistical tools entailed standard deviation, mean, maximum and minimum values that were employed to summarize data. Inferential statistical tools entailed the regression model. The study results revealed that firm size had a negative and significant relationship between with dividend payout while profitability had a positive and significant relationship with dividend payout respectively. The results further revealed that firm growth had a positive and significant effect on DPR while firm age negatively and significantly affected dividend payout respectively. The study concluded that firm size, profitability, firm growth and firm age had a significant effect on dividend payout of listed non-financial firms at the NSE. The study recommended that the management of quoted non-financial entities should invest more in fixed assets and properly manage those assets to growth their entities, to generate revenue as well as enhance economics of large-scale production to enhance performance which will enable the entities to pay dividends.