Abstract: Corporate dividend payout policy has been an issue of interest in the financial literature for a long time. Despite the vast research on the topic, it remains debatable. For this reason, dividend policy has become one of the most debated topics in corporate finance and among many academics. Over forty years have been spent researching dividend policy, and thus far, it has not been resolved. Several theories have been proposed to explain the relevance of dividend policy and whether it affects shareholders wealth, but there has not been a universal agreement. It is because of this that the current study sought to investigate the determinants of share holders’ wealth among listed financial firms’ on the Nairobi Securities Exchange. The study specifically investigated the effect of dividend payout, leverage and growth on shareholders wealth. The study also investigated the effect of firm size as a control variable on shareholders wealth. The study was hinged on the Dividend relevance theory, and the signaling effect of dividend. The study adopted descriptive survey research design. Data was analyzed using SPSS version 22. The study sought to establish the effect of dividend payout on share holders’ wealth among listed financial firms’ on the Nairobi Securities Exchange. The study concludes that shareholders wealth measured as market price per share is positively and insignificantly associated with the amounts of dividends paid by the firms. The amount of dividends paid is also positively and insignificantly related to shareholders wealth. The study also sought to determine the effect of leverage on share holders’ wealth among listed financial firms on the Nairobi Securities Exchange. The study concludes that Leverage is negatively and insignificantly associated with shareholders wealth. Leverage is also negatively and significantly related to shareholders wealth. The study sought to determine the effect of growth on shareholder’s wealth among listed financial firms’ on the Nairobi Securities Exchange. The study concludes that growth of the firm is positively and significantly associated with shareholders wealth. Furthermore, growth is positively and insignificantly related to shareholders wealth. The study also sought to find out the effect of firm size as a control variable on share holders’ wealth among financial firms’ listed on the Nairobi Securities Exchange. The study findings led to the conclusion that firm size is positively and significantly associated with the shareholders wealth. Firm size also controls the relationship between shareholders wealth and dividend. Following the findings and conclusions, the study recommends that both current and potential investors who are predicting future shareholders wealth in a firm should take note of the firm’s financial leverage and size. They should expect higher shareholders wealth (Market price of the share) among firms with high assets as well as firms with low leverage ratio. Another recommendation made by the study is that managers should incorporate policies to pay low amounts of dividends when their firms have high leverage. This will in turn lead to an improvement in the shareholders wealth. The study also recommended that the government should make policies that encourage dividend payout when there is a need to raise more revenue from dividend withholding tax.
Keywords: Financial Literature, SPSS, Market price of the share.
Title: Determinants of Share Holders’ Wealth among Listed Financial Firms’ on the Nairobi Securities Exchange
Author: Imukuny Geoffrey, Dr Mutua Mbithi, Maniagi Musiega
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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