The Effects of Dividend Policy on Market Share Price of the Listed Companies at the Nairobi Securities Exchange (NSE) in Kenya

Azenga Valaria Vutale, Bo Chen


Dividend policy despite been widely researched in different markets remains a mystery as to whether it's relevant or irrelevant to market share prices, this is due to different conclusions drawn from the studies. This made the study to explore the effects of dividend policy on market share price of the listed companies at Nairobi securities exchange (NSE) Kenya from the year 2011 to 2016. Secondary data obtained from the financial statements of the companies and the Nairobi security exchange website was used for the study. Purposive sampling design was used with a sample size of 33 companies selected from a population of 66 companies based on consistency in the listing of shares, consistency in payment of dividend for the six-year period, and data availability. The study employed multiple regression analysis. The market share price was used as dependent variable, dividend policy (measured by dividend payout ratio and dividend per share) as independent variable, while earnings per share, return on assets, financial leverage and growth as control variables. Data was analyzed at 5% level of significance. The results revealed that both dividend per share and dividend payout ratio have a significant effect on share price. Earnings per share and financial leverage have a significant effect on share price while return on assets and growth  have an insignificant effect on the market share price of listed companies at the Nairobi Securities Exchange (NSE). The study in relation with the findings concludes that dividend policy has an effect on the market share price of listed companies at the Nairobi Securities Exchange(NSE), and is therefore not in support of the dividend irrelevance theory.

Keywords: Dividend policy, market share price, Nairobi securities exchange, ols regression.


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