The impact of board composition on dividend policy for listed companies in Kenya
Date
2020
Authors
Njogu, Sylvia Bakhita
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
With the emphasis on proper corporate governance new co1porate guidelines have recently been
issued regarding board composition. TY1erefore, this study investigated the effect of board
composition on dividend policy in listed non-financial firms in Kenya. The study was made up of
a sample of 174 observations from 29 non-financial firms from 2013-2018. Dividend policy was
divided into dividend decision and dividend payout. Board composition was represented by
board independence, gender composition, board size and director ovvnership. The control
variables were ROA, leverage and firm size. The relationship between dividend payout and
board composition was obtained through a left-censored Tobit regression. The relationship
between dividend decision and board composition was obtained through a logit regression.
Based on the Tobit regression board size was a variable found to be positively significant.
However, in the logit regression an additional variable was found to be significant besides board
size, which was director ownership. 1Y1e other firm specific control variables used in the stz~dy
also had desired impact on dividend policy. The results suggested that firms that have a larger
board pay higher dividend. This evidence was consistent with the fact that the more the
directors, the more the diversification benefits leading to a higher return that result into payment
of a higher dividend. Hence, having a large board can be thought as a method to mitigate
agency conflict because payment of a large dividend reduces the free cash flow.
Description
Submitted in partial fulfilment of the requirements for the degree of Bachelor of Business Science in Finance at Strathmore University