Institutional Ownership as A Predictor of Dividend Policy of Commercial Banks in Kenya

Abstract

In Kenya the mismanagement of banks has led to banks being put under receivership and therefore denying shareholders return on their investment in form of dividends. The mismanagement has been linked to the ownership structure or share composition of the bank something that has resulted in the CBK going after assets of such banks and therefore denying shareholders return on their investment in form of dividends. Studies on ownership structure and dividend policies in Kenya have not produced conflicting results hence the need for further research with a bias in the Kenyan banking industry. The study main objective was to examine the influence of foreign ownership structure on dividend policy of commercial banks in Kenya. The study adopted the dividends signaling theory and stewardship theories. Descriptive survey research design was used to find the link between ownership structure and dividend policy. The target populations were all the 43 commercial banks licensed to operate in Kenya and all the chief finance officers employed by the 43 commercial banks. A census approach was adopted where all Chief Finance Officers of the 43 commercial banks were targeted. The study adopted primary data which was collected using a structured questionnaire. The results of the study indicated that the institutional ownership insignificant negative influence on dividend policy. The study recommends that investors consider ownership structure when making investment decision.

Key words: Dividends, Ownership, shareholders

DOI: 10.7176/RJFA/10-6-14

Publication date: March 31^st 2019