Assessment Of The Firm’s Selected Characteristics On Dividend Payout Policy Implementation: A Survey Of Financial Institutions Listed At Nairobi Securities Exchange

Abstract

Dividend payout policy implementation in many companies has over time been an issue especially in company finance. Investors expect a fair return on their investment irrespective of their preference either capital or dividend gain. However there has been a variance between expected return and actual return on investment in terms of dividends. The aim of the study was to assess the firm’s selected characteristics on dividend payout policy implementation of listed financial companies: a survey of Nairobi Securities Exchange. The study was guided by the following objectives: to establish the extent to which investment decisions determine dividend payout policy implementation of listed financial companies in Nairobi Securities Exchange, to investigate the extent to which company earnings determine dividend payout policy implementation of listed financial companies in Nairobi Securities Exchange and to analyze the extent to which firms growth opportunities determine dividend payout policy implementation of listed financial companies in Nairobi Securities Exchange. The study was guided by Walter’s model. The study adopted a survey study research design; surveys attempt to capture attitude or patterns of past behavior and they are relatively inexpensive and are useful in describing the characteristics of a large population. The population for this study was top level managers and middle level managers from financial firms on the Nairobi Securities Exchange listed as at June 2015 totaling to 111 respondents. To get a representative sample, the researcher used purposive sampling method to sample top level managers and simple random sampling technique for middle level managers. In order to determine the sample of middle level managers the researcher used Yamane‘s (1967) formulae. Data was collected using questionnaires which had a 5 point Likert scale structural questionnaire. To determine the validity of research instrument, the items in the questionnaires’ content, structure and sequence were appropriately amended to remove any ambiguities; Reliability was tested through test-Retest technique with a correlation coefficient of above 0.6 being considered high enough to judge the instruments reliability. The data was then entered into the SPSS Statistical Package version 20 for analysis of data and the results were presented using descriptive statistics that include frequencies, percentages and other measures of central tendency i.e. means and standard deviations and inferential statistics such as multiple regression and Pearson correlation. The study will be of great significance to the management of listed financial institutions will find the study useful because it will enable them to formulate effective strategies that determine dividend payout policy implementation. It will be of great help to investors when selecting and building their investment portfolios depending on their dividend payout preferences. The findings will also help provide investors with information about the predictability of returns in the securities market. The study lastly will act as a source of reference material for upcoming scholars on other related topics; it will also help other academicians who will undertake the same topic in their studies.