Effect of Ownership Structure on Dividend Policy of Listed Firms at the Nairobi Securities Exchange

Abstract

Ownership structure leads to agency problems since majority shareholders have high levels of incentives hence, they monitor the actions of the management and influence decisions. There has been a growing debate on whether ownership structure impacts on management decisions especially dividend policy decisions. The objective of this study was to determine the effect of ownership on dividend pay-out of listed firms at Nairobi Securities Exchange. The study employed correlation analysis and multiple regression analysis in establishing relationship between types of ownership structures and dividend pay-out. This research was anchored by agency theory and utilized a cross-sectional descriptive research design. The population comprised of 63 listed firms listed in the ten-year Period under consideration. Diagnostic tests and descriptive statistics were carried out afterwards inferential statistics: correlation analysis and regression analysis were applied in hypothesis testing. The study found that an increase in concentration of Managerial Ownership and Foreign Ownership caused an increase in dividend pay-out because cash dividends tend to be higher where the managerial and foreign ownership presence in the board of directors is higher. In addition, state ownership and institutional ownership caused a caused a decrease in dividend pay-out because the state and Institutional Owners prefer cash retention as opposed to dividend distribution in the company.