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This paper attempts to examine the possible effects of dividend policy on the market value of firms listed at the Nairobi Securities Exchange.The study applied secondary data to investigate the market and sector-wise regression analysis using the Software for Statistics and Data Science i.e.Stata14.
The random-effects regression results for the market-wise analysis showed a statistically significant and positive relationship between cash dividend per share and the firms?value.Similarly,earnings per share and debt to equity ratio are statistically significantly and positively related to firms?value.On the other hand,the study revealed firm value had strongly and negatively related to retained earnings,but a weak and positive association with firms?size.Further findings on the sector-wise regression analysis showed that cash dividend per share and firms value are significantly and positively related in the banking,manufacturing,automotive,and telecommunication sectors only.The overall result indicated that the impact of dividend policy on firms?value differs from industry to industry.
Based on the above findings,the study recommended that management of the banking,manufacturing,automotive,and telecommunication sectors could increase their firms?value by making higher dividend payments than retaining more cash.Furthermore,it is recommended that investors at Nairobi Securities Exchange need to have enough knowledge of each sector;so that they can make a sound investment decision.
The random-effects regression results for the market-wise analysis showed a statistically significant and positive relationship between cash dividend per share and the firms?value.Similarly,earnings per share and debt to equity ratio are statistically significantly and positively related to firms?value.On the other hand,the study revealed firm value had strongly and negatively related to retained earnings,but a weak and positive association with firms?size.Further findings on the sector-wise regression analysis showed that cash dividend per share and firms value are significantly and positively related in the banking,manufacturing,automotive,and telecommunication sectors only.The overall result indicated that the impact of dividend policy on firms?value differs from industry to industry.
Based on the above findings,the study recommended that management of the banking,manufacturing,automotive,and telecommunication sectors could increase their firms?value by making higher dividend payments than retaining more cash.Furthermore,it is recommended that investors at Nairobi Securities Exchange need to have enough knowledge of each sector;so that they can make a sound investment decision.