INFLUENCE OF DIVIDEND POLICY ON STOCK PERFORMANCE AMONG BANKING SECTOR FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
The Nairobi Securities Exchange, which is an emerging market, shows some features of an immature market, with weak regulations compare to developed markets in Europe and America. Investors in this type of market concentrate more on their dividend returns due to the substantial market risk and undiversified volatility, which in the long run, may have effect on the firm’s stock performance. This implies that stock performance is important to both firms and investors. Therefore, the volatility of stock market share prices in Kenya motivated this study to investigate the influence of dividend policy on stock performance of banking sector firms listed in NSE. The study was informed by signaling theory and dividend irrelevance theory. The study adopted explanatory design and targeted 12 banking sector companies listed on Nairobi Security Exchange with a target population of 126 respondents; then Yamane’s formula used to calculate a sample size of 96 respondents, who were sampled through stratified sampling technique and selected using simple random sampling to participate in the study. The study used structured questionnaires to collect primary data. The research instruments were pretested in a selected established firm registered in NSE using 10 respondents from the firm. Content validity was used to check instrument validity while Cronbach’s alpha was used to check instrument reliability. Data collected from the field was coded, cleaned, tabulated and analyzed using both descriptive and inferential statistics with the aid of specialized Statistical Package for Social Sciences (SPSS) version 24 software. Descriptive statistics was used to compute means, percentages, frequencies, standard deviations while inferential statistics was used for variable relationships. From the values of unstandardized regression coefficients with standard errors in parenthesis, all the independent variables were significant predictors of stock performance (dependent variable). The study concluded dividend policy is a significant predictor of stock performance, thus trading firms that craft and implement viable dividend policies can boost their stock performance. The study recommended that trading companies should craft and implement viable dividend policies that will attract a positive yield on their stock performance.
Key Words: Dividend Policy, Stock Performance, Banking Sector Firms, NSE
CITATION: Mwanje, P., & Otinga, H. (2019). Influence of dividend policy on stock performance among banking sector firms listed in Nairobi Securities Exchange, Kenya . The Strategic Journal of Business & Change Management, 6 (2), 1843 –1854.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1224
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