Determinants of dividend policy in listed commercial banks in Kenya
This study examines the determinants of corporate dividend policy within the listed Commercial Banks in Kenya using a paired approach of statistical analysis and questionnaire survey tool. The study spans the period to 2007 from 1998 using information collected from the financial corporate managers and secondary sources of the listed Commercial Banks. The variables and the predicted associations used in the statistical analysis are derived from the prior literature. Both the regression model output and the respondents supported profitability and liquidity as key determinants of the dividend policy. Debt and investment, even though explicitly supported by the respondents, do not appear as significant from the regression output. Size was ranked as explicitly insignificant or weak by both the respondents and the regression analysis. Dividend policy decisions seem to be supported by clientele effects, signaling, and agency / costs theories. Agency cost theory seems to offer remote support to the pecking order and the bird-in-the-hand theories. However, given that taxation on dividend income is a paltry 5 percent and a final tax, the tax clientele does not seem to contradict investors' desire for regular cash dividends. The study finds no potential justification for the dividend irrelevant theories as the interrelationships between investment, financing and dividend policies find overwhelming support. The study contributes that the empirical findings that profitability and liquidity are significant determinants of dividends, applies to the commercial Banks listed on the NSE as well. Owing to the findings that dividend policy decisions have information content, can affect firm value and in turn or directly affect the wealth of shareholders the dividend policy is worthy every attention by senior management Board.