Dividents Practise in Kenya and Effect on the Shares of a Firm
A SURVEY OF DIVIDEND PRACTICES IN KENYA: A CASE STUDY OF QUOTED FIRMS IN THE NAIROBI STOCK EXCHANGE
JUNE 2009
ACKNOWLEDGEMENT
We are grateful to our supervisor, Mr. Luther Otieno for tirelessly guiding us throughout the writing of the project. Indeed, his encouragement and wise counsel greatly inspired us throughout the period we were writing this project. In addition, we thank all the lecturers at the University of Nairobi who taught us during our undergraduate studies.
We are also grateful to all our respondents for their co-operation during the data collection stage of our project. Indeed, without their co-operation, it would not have been possible to successfully complete this project.
Finally, we thank our colleagues who unrelentlessly supported us throughout the entire project period.
ABSTRACT
The three major decisions of the firm are investment, financing and the dividend decisions. The crucial question in dividend policy is whether dividends have an influence on the value of the firm given a firms investing and financing decision. Many researches have been done on the relevance or irrelevance of dividend policy.
In this study, dividend relevance theory was assumed to be true. The objective of this study was to find out the dividend practices followed by firms quoted on the Nairobi Stock Exchange, and specifically the factors managers consider before paying dividends.
Primary data, collected by use of a questionnaire, and Secondary data obtained from the NSE library and company libraries was used. Companies that were consistently quoted at the exchange and paid dividends during that period were included in the sample.
According to the findings of this study, the determinants of dividends payments are profitability and liquidity, investment opportunity, tax on dividends, firm growth, firm size, loan commitments, agency cost, shareholder preferences, business risk, asset structure, institutional ownership, ownership structure and effects on
JUNE 2009
ACKNOWLEDGEMENT
We are grateful to our supervisor, Mr. Luther Otieno for tirelessly guiding us throughout the writing of the project. Indeed, his encouragement and wise counsel greatly inspired us throughout the period we were writing this project. In addition, we thank all the lecturers at the University of Nairobi who taught us during our undergraduate studies.
We are also grateful to all our respondents for their co-operation during the data collection stage of our project. Indeed, without their co-operation, it would not have been possible to successfully complete this project.
Finally, we thank our colleagues who unrelentlessly supported us throughout the entire project period.
ABSTRACT
The three major decisions of the firm are investment, financing and the dividend decisions. The crucial question in dividend policy is whether dividends have an influence on the value of the firm given a firms investing and financing decision. Many researches have been done on the relevance or irrelevance of dividend policy.
In this study, dividend relevance theory was assumed to be true. The objective of this study was to find out the dividend practices followed by firms quoted on the Nairobi Stock Exchange, and specifically the factors managers consider before paying dividends.
Primary data, collected by use of a questionnaire, and Secondary data obtained from the NSE library and company libraries was used. Companies that were consistently quoted at the exchange and paid dividends during that period were included in the sample.
According to the findings of this study, the determinants of dividends payments are profitability and liquidity, investment opportunity, tax on dividends, firm growth, firm size, loan commitments, agency cost, shareholder preferences, business risk, asset structure, institutional ownership, ownership structure and effects on