Determinants Of Dividend Payout For Firms Listed At Nairobi Securities Exchange

Abstract

Over the years, dozens of theories have attempted to explain the dividends phenomenon with no consensus reached. Many of the theories view agents as rational and dividends either serve as an efficient way to resolve agency problems or as a signaling device to mitigate information asymmetry problems. This study sought to establish the determinants of dividend payout ratio for companies listed at the Nairobi Securities Exchange. The specific objectives of the study were to determine the influence of profitability, liquidity, leverage and firm size on dividend payout ratio for companies listed at the Nairobi Securities Exchange. The target population of the study were all the 64 firms listed at the NSE as at 31st December 2021. However, one of the firms was listed after 2017 while 5 were suspended remaining with 58 listed firms at NSE. Thus, a census of all the 58 NSE listed firms was conducted. The study employed descriptive research design and secondary data was collected for a period of 5 years, from 2017 to 2021. Data was analyzed using descriptive statistics and panel data regression. Descriptive statistics involved determining the mean, the standard deviation, skewness and kurtosis for each variable under study. Panel data regression analysis established the nature and significance of the relationship between the study variables. Stata version 16 was employed to analyze the data. The analyzed data was presented using tables and charts. The findings of the study indicated that firm size, liquidity and profitability of the companies listed at the Nairobi securities exchange had a positive and statistically significant relationship with dividend payout. However, financial leverage was found to have a positive but insignificant effect on the dividend payout of the listed firms under study. The study recommended that the listed firms under study should focus on making their operations cost efficient and effective to maximize profits and should invest some resources in fixed assets but have more investments in liquid assets. The firms relying on loans to finance its operations should not focus on paying dividends to its shareholders but the immediate focus of these firms and finally the firms should focus on investing the profits accrued from the operations of the company back to the company to grow the company and make it stable.