Effect of firm-level factors on the dividend payout among listed financial firms at the Nairobi Securities Exchange
Date
2021
Authors
Muchiri, Lydia
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Investors expect a fair return on their investment irrespective of their preference, either capital or dividend gain. Financial reports of the listed firms in Kenya have shown that more than half of the listed firms have been unable to offer special dividends or have at least reduced the dividends payout. The current study sought to examine the effect of firm-level factors on the dividend payout among listed financial firms in Kenya. The study examined how profitability, liquidity, and leverage influence the dividend payout within the firms. The research was grounded on a bird in the hand theory, the shiftability theory of liquidity, and the efficient structure theory. The study adopted a descriptive, explanatory research design to assess the association between the research variables. The study adopted census sampling of the respondents. The sample size of the study was the 23 listed financial firms. The study relied on quantitative panel data that was collected from the listed financial firms in Kenya for the period 2012-2018. The collected research data were analyzed using descriptive and inferential statistics. The study utilized panel regression to determine the relationship between the study variables. The findings of this study are expected to enhance managerial practice and policy formulation within the financial sector. The study concluded that 11.01% of changes in the dividend payout within listed firms is determined by the selected firm-level factors, firm size and the capital adequacy. The findings led to the conclusion that profitability positively improves the level of dividend payout. The research also concluded that individually liquidity, leverage, firm size and capital adequacy does not have a significant effect on the dividend payout of the listed financial firms. The study recommends that listed firms should develop internal control mechanisms to monitor the debt levels within the firm, ensure sustained cash flow to the firm, and maintain a good liquidity level within the firm. The study also recommends that listed firms should ensure that firms should strike a balance between dividend payments and future investment of residual income within the firm.
Description
A Thesis submitted in partial fulfillment of the requirements for the award of the Degree of Masters of Business Administration at Strathmore University Business School
Keywords
Profitability, Liquidity, Leverage, Firm size, Capital adequacy, Dividend payout