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Meshack H. Obiero Onyango The purpose of this study was to determine the impact of dividend policy on a firm`s share price. The research questions/objectives in this study were to establish whether firms with a dividend payout policy experience higher growth in share price as compared to firms without the dividend payout policy. The study also sought to establish whether the dividend signaling theory is supported by the empirical evidence on the effect of dividend policy on share price movements in Kenya. The research adopted exploratory research design that was causal in nature. A sample of twenty listed companies on the Nairobi Stock Exchange was examined for the period from 2001 to 2010. Data about these companies were obtained from the Nairobi Stock Exchange database.
To measure the impact of dividend policy on share price, both descriptive and inferential statistics including graphical analysis, regression and correlation analyses were used. The study revealed that 0.79 or 79% of the variations in the dependent variable were explained by the variations in share price. Similarly, the study found a significant relationship between dividend policy and a firm`s share price. Additionally, it was found that firms that regularly declared dividends reported higher share price compared to firms that did not .The study also found a strong support for Dividend Signaling Theory in Kenya. On the basis of the findings, it is recommended that companies need to have formal dividend policy in place as this has significant implication on the share price. This will in the process augment the company’s ability to maximize share holders wealth in the long run. |
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Last Updated on Wednesday, 23 November 2011 21:49 |
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