Effects of Dividend Policy on Share Price of Firms Listed at the Nairobi Securities Exchange, Kenya

Dividend policy is a widely researched topic in the field of corporatefinance; however, it still remains a mystery as to whether dividend policyaffects the share prices of quoted firms. During the period under review(2001-2011), share prices of listed firms in the Nairobi Securities Exchangeseverely fluctuated making it difficult for investors to make informedinvestment decisions. The general objective of this study was to investigatethe effect of dividend policy (cash and share dividend) on the stock prices,specifically, the study sought to establish the relationship between cashdividend and the share prices and to determine the relationship between sharedividend and share prices of firms listed at the Nairobi Securities Exchange.The data set consisting of volume weighted average price as dependent variableand cash dividend per share and share dividend per share as independentvariables were collected using data collection schedules for 55 companiessampled for the study. Secondary data was obtained from Nairobi SecuritiesExchange, Capital Market Authorities, Kenya Bureau of Statistics and fromsampled companies for a period between the years 2001 and 2011. Ordinary LeastSquare diagnostic tests were run to ascertain the suitability of the model andthe results showed that the model was suitable for estimation since it did notsuffer from multicollinearity, heteroscedasticity and non-normality problems.Random Generalized Least Square regression analysis was carried out with thehelp of STATA at five percent level of significance. The results of the marketindicated that there was a statistically significant positive relationshipbetween cash dividend and share prices while there was statisticallyinsignificantly negative relationship between share dividend and share prices.This implied that dividend policy affects the share price and that increase incash dividend would result in increase in share price for companies listed atthe Nairobi Securities Exchange, Conversely, an increase in share dividendwould result in an insignificant decrease in share price for companies listedat the Exchange. The results of the study confirmed relevance of dividendpolicy on firm’s value. Based on the findings of the study, it was recommendedthat the management of Capital Markets Authority of Kenya should amend Cap 485ALaws of Kenya and other relevant laws and regulations and ensure enforcement ofthose laws among other measures to guarantee consistent practices by listedfirms that lead to efficiency in the market for the benefit of the investors.Further, the management of listed firms should consider adoption of cashdividend policy more than share dividend as a strategy aimed at increasing thevalue of the firms due to its positive effect on the share price. If this isdone consistently, the shareholders’ wealth would be maximized in the long run.It is thus recommended that further research could be conducted to establishwhether macroeconomic variables affect equity price for firms listed at theExchange. Keywords: Dividend policy, Share price, SecuritiesExchange, investment decisions, stock prices, cash dividend per share and sharedividend per share

Dividend policy and payout practices in Malaysia : a qualitative analysis

Since stock prices reflect the firm’s future earnings potentials (Miller and Rock, 1985), dividends announcements therefore convey new information to the market about the future prospects of the corporation. As such, the objective of the current study is to examine the potential role that dividend payouts play in influencing the fund managers and investors in recommending or selecting a stock, and for various stocks’ performance assessment. In addition, the study attempts to examine the possible effect of taxation on dividends payout. The study uses qualitative methods in form of semi structured interviews conducted with six Malaysian investment managers. The findings revealed that dividend payouts are not solely used as a basis for stock recommendation and assessment of companies’ performance by fund managers in Malaysia. Furthermore, taxation was found to be significant in determining dividend payouts by companies in Malaysia. These findings have great contributions to the dividend policy theory, as well as to the practitioners and policy makers that are discussed in details at the end of the paper.peer-reviewe

Three Corporate Finance Practices in Pakistan: A Review of Previous Studies and Way Forward

This study reviews the previous empirical studies about the Pakistani capital market and specifies the pattern of three corporate finance practices. Various activities performed at the firm level such as capital budgeting, capital structure, and dividend payout policy are analyzed in the field of corporate finance. The capital budgeting technique consists of six methods, that is, net present value, discounted cash flow, payback period, and internal rate of return. However, Pakistani firms are often interested in the net present value and the internal rate of return for capital investment evaluation. Similarly, the capital structure decision carries the debate regarding two options of financing, that is, debt financing and equity financing, although the literature shows that the Pakistani firms generally follow the pecking order theory and prefer debt financing. Similarly, as for concern dividend payout policy, the extant literature discusses different theories and determinants although it is still not possible to generalize the dividend payout trend on its basis, specifically in the Pakistani context. Corporate managers and policymakers can use the conclusion of this study for strategic purposes

Determinants of dividend policy: empirical evidence from Nigerian listed firms.

The aim of this research thesis is to contribute to already extensive corporate finance literature in the context of the Nigerian market by examining the determinants of dividend payouts by non-financial firms listed on the Nigerian Stock Exchange (NSE). Accordingly, two proxies for dividend policy were used: dividend intensity and the dividend payout ratio. Also, six explanatory variables - return of assets, size, debt ratio, growth opportunities, liquidity ratio and tangibility of assets - were selected, based on the theoretical predictions and empirical findings from the literature reviewed, in order to explain the determinants of dividend payouts of non-financial firms in Nigeria. This study used a quantitative method design based on a positivist paradigm to draw its conclusions. Secondary data from the annual accounts of 74 non-financial companies listed on the NSE, for a five-year period from 2013 to 2017, were manually collected from companies' official websites, while market data was obtained from the Nigerian Stock Exchange. Thereafter, pooled OLS models were employed in analysis and testing of the research hypotheses formulated. The findings of this study indicate that dividend payouts were positively correlated to profitability, growth opportunities and liquidity, whereas size, debt ratio, and asset tangibility were all found to be negatively correlated to dividend payouts. Further proof reveals that time and industry effects do not impact much on the dividend payouts of Nigerian firms. Finally, this present study makes a significant contribution to both academia and practice. First, it provides a basis for future research, as it appears to be the first study in Nigeria to cover all sectors using up-to-date accounting and market data to investigate empirically the determinants of dividend payouts of non-financial firms listed on the Nigerian Stock Exchange. Secondly, this research was designed to advance knowledge of corporate finance in order to provide further evidence on the determinants of dividend payouts of such firms to facilitate comparison with other similar studies in emerging markets. Finally, it assists firms in understanding the dynamics of the Nigerian market, especially the institutional environment including the financial, legal and political system, with a view to making more informed decisions about the determinants of corporate dividend policy decisions

Stock Price and Investment Measures in Bangladesh

Stock price fluctuation is a usual phenomenon throughout the world. But in case of Bangladesh, stock prices fluctuate violently-disregarding all micro and macro economic fundamentals. This paper has attempted to analyze the behavior and structure of stock prices in Bangladesh in terms of some investment measures. This has also examined the patterns of stock prices with a view to discovering the main factors, both economic and non economic, behind it. The potent factors governing the stock price behavior in Bangladesh appear to have been, by and large, economic in nature although psychological and political factors have also caused violent fluctuations in prices. Market manipulation and other market abuses like insider trading, underhand dealing have their worst impact in wild and wide fluctuations sometimes. Dividend decision of the enterprises has a critical role to play in price formation and substantial relationship between stable dividend policy and PER has been observed. The conventional investment measures like stock yield and PER display relatively high volatility in Bangladesh market causing weak relevance to market reality. Thus, investors need to pay attention to other measures such as PBR. Anyway, security markets provide investors a means to trade freely and timely, issuers to raise funds cheaply and smoothly and the economy to allocate resources efficiently. In order to attain the optimum level of efficiency, the concerned authorities should continue their efforts to such areas like broadening the active membership of the exchange, ensuring fairness and transparency, enhancing professionalism, integrity and liquidity of the marke

Working Capital Management and Cash Holdings of Banks in Ghana

The impact of working capital management on profitability and liquidity is hardly contended. The main thrust of this work is to ascertain the relationship between working capital management and bank cash holding in Ghana. Panel data covering the ten-year period 1999 – 2008 was analyzed within the framework of the random effects technique was used for the presentation and analysis of findings. The results show that while debtors’ collection period, cash conversion cycle, capital structure, bank size have significantly negative relationship with  the cash position of banks, creditors payment period and profitability have significantly positive relationship with the cash position of banks in Ghana. The revelations in this paper go to inform bank directors and policy makers on the direction of managing bank working capital in order to ensure adequate liquidity. Key Words: Working Capital Management, Cash Holdings, Banks, Ghana

Corporate Governance for Banks in Pakistan : Recent Developments and Regional Comparisons

The emerging economies in the South Asian region have embarked on a bold reform process to develop the banking sector. This development has improved the transparency and accountability of the banking sector because these countries focused on best practice corporate governance for banks. In view of a rapidly developing market with a slow pace of information dissemination, adverse selection and moral hazard problems are likely to be on the rise and may need a mechanism to train and discipline bank management. It was, therefore timely for the central banks in the region to introduce a best practice for the banking system as a whole. This study provides a survey of recent developments in corporate governance of the banking sector in Pakistan and a comparison of similar developments in two other regional economies, namely, India and Bangladesh. In addition to a theoretical discussion on this issue, we also provide an overview of the banking sector restructuring and highlighting important features of the codes of corporate governance established by central banks in the sample countries. In conclusion, we present a comparison of the major differences in these measures across countries and comment on the pace of these developments.Banking, Corporate governance, banking sector restructuring

Corporate Governance for Banks in Pakistan: Recent Developments and Regional Comparisons

The emerging economies in the South Asian region have embarked on a bold reform process to develop the banking sector. This development has improved the transparency and accountability of the banking sector because these countries focused on ‘best practice’ corporate governance for banks. In view of a rapidly developing market with a slow pace of information dissemination, adverse selection and moral hazard problems are likely to be on the rise and may need a mechanism to train and discipline bank management. It was, therefore timely for the central banks in the region to introduce a ‘best practice’ for the banking system as a whole. This study provides a survey of recent developments in corporate governance of the banking sector in Pakistan and a comparison of similar developments in two other regional economies, namely, India and Bangladesh. In addition to a theoretical discussion on this issue, we also provide an overview of the banking sector restructuring and highlighting important features of the codes of corporate governance established by central banks in the sample countries. In conclusion, we present a comparison of the major differences in these measures across countries and comment on the pace of these developments.Corporate Governance, Banks, Pakistan