Effect of corporate shareholding structure on dividend policy of firms listed in Nairobi securities exchange

Abstract

Every business organization has its own way of building its corporate shareholding structure and it affects the decision of dividend payment. The general objectives of the study were to study the effect of corporate shareholding structure on dividend policy of listed firms in Nairobi securities exchange. The specific objectives of the study were; to examine the effect of foreign shareholding structure on dividend policy of listed firms in NSE; to evaluate the effect of local individual’s shareholding structure on dividend policy of firms listed in NSE, to determine the effect of local institution shareholding structure on dividend policy of firms listed in NSE. The study adopted stratified research design. The target population of the study comprised of all the 67 firms which have been listed in the NSE as at December 2018. The data for the study was obtained from 40 firms that had been consistently listed in the NSE from 2012 to 2016. Data for the study was collected from annual published financial statements. Both descriptive and inferential analysis was conducted. Regression analysis was applied to test the effect of shareholding structure on dividend policy. The data analyzed was presented in form of tables. The results of the study showed that there is statistical significant relationship between foreign shareholding structure and dividend payout ratio P=0.000 (P<0.05) and there is no statistical significance relationship between local institution shareholding structure and dividend payout ratio p=0.012 (p<0.05). It also shows that there is statistical significant relationship between local individual shareholding structure and dividend payout ratio P=0.00 (P<0.05).Therefore this study concludes that there is no statistical significant relationship between shareholding structure and dividend policy of firms listed in the Nairobi Securities Exchange. The research recommends that there should be a strike of balance between shareholding structures as they are useful to the firm management in deciding an appropriate dividend policy, and to the shareholders in making investment decisions. If manager considers that dividend policy is vital to their investors and has positive effect on share price, they should embrace managed dividend policy rather than the residual one. Appropriate firm disclosure with respect to dividend payout is needed to guard the investing public in making the right investment choices in listed firms in Nairobi securities exchange.