Influence of Professional Expertise on Dividend Policy among Listed Firms in Nairobi Securities Exchange in Kenya

Abstract

Management of corporations has been faced by challenges emerging from internal managers not being able to effectively offer stewardship. The organizations owners therefore have to improvise means of ensuring that their interests are protected. In modern corporation’s owners embrace mechanisms like board diversity to mitigate against managers failures to act in their interests. The purpose of this study was to examine the influence o professional expertise on Dividend Policy among listed firms in Nairobi Securities Exchange. In the recent past, most corporations in developing economies experience unstable dividend payment hence the need to determine whether professional expertise can remedy dividend payment situation prevailing. The study examined how professional expertise can influence dividend policy in companies listed on the NSE. The study was guided by agency, signaling, resource dependency and power circulation theories. The study used the explanatory research design. Document analysis was used to collect secondary data from annual reports of firms. Data was analyzed using descriptive statistics such as the mean, median, and standard deviation and fixed effect multiple regression analysis was done to examine the effects between professional expertise and dividend policy in annual reports of firms. The study was also expected to contribute new knowledge on the relationship between professional expertise and dividend policy. The regression results showed that professional expertise (β = .226, p = .490) exhibit a strong direct relationship with dividend policy. The study recommends that policy makers to ensure development of regulations to enhance professional expertise among firms since professional expertise brings about overwhelming benefits to corporate owners by minimizing agency problems related to free cash flows hence enhance payout to shareholder and reduce risk of misallocation of excess resources by firm managers. The study also recommends further studies to be carried out on the relationship between professional expertise and dividend policy on privately owned, SME’s, both listed and unlisted firms using similar study variables and a longer period for the same study to determine whether optimal results would be achieved.

Keywords: Professional Expertise, Dividend, Policy, Resource dependency, securities exchange