Ownership structure, financial performance, firm size and dividend pay-out of firms listed on the Nairobi securities exchange, Kenya.

Abstract

This study aimed at establishing whether ownership structure, financial performance and firm size have a significant effect on dividend payout ratio. The study focused on firms listed on the Nairobi Securities Exchange between the years 2014-2018. The study was guided by the following objectives; to find out the effect of ownership structure on dividend payout, to find out the intervening effect of financial performance on the relationship between ownership structure and dividend payout, to determine the moderating effect of firm size on the relationship between ownership structure and dividend payout and lastly to determine the joint effect of ownership structure, financial performance and firm size on dividend payout ratio. This study adopted agency theory, signaling theory, stakeholder theory and resource dependence theory. The study adopted descriptive cross-sectional design. The study adopted multiple regression analysis as an econometric strategy for estimating the association between the study variables. The target population of the study was the 59 firms listed on the Nairobi Securities Exchange and a sample of 39 firms was adopted using convenience sampling. The study was anchored on four hypotheses, which were tested against a total sample of 39 firms listed at NSE. The study utilized secondary data from the published financial statements of the companies. The findings of the study established that ownership structure (P<0.954) has no significant effect on dividend payout; Ownership structure (r=.447, P<.020), Firm Performance (r=.447, P<.020) and Firm size (r=.407, P<.047) have a significant effect on dividend payout of the firms. The findings of the study also indicated that (r=.328, P>.142) have no significant effect on the dividend payout of the firms listed on the NSE. Firm size has a significant moderating effect on the relationship between ownership structure (r=.447, P<.020) and dividend payout. Financial performance has a significant intervening effect (P=.048) on the relationship between ownership structure and dividend payout. The study recommended that firms listed on the NSE should consider other factors that influence dividend payout. Although firms’ ownership structure affect their dividend payout, the effect is not significant. Firms also need to consider their financial performance before deciding on the dividend payout to be advanced to their shareholders. Furthermore, the firms listed on the NSE should consider firm ownership structure and Firm Performance before making the decision on how much dividend to pay to the shareholders as this has a significant effect on the dividend paid to the shareholders of the firms. Lastly, there is also need to factor in firm size of the firms listed on the NSE before deciding on the dividend payout to the shareholders, as firm size has a significant moderating effect on the relationship between ownership structure and dividend payout of these firms.