EFFECTS OF DIVIDEND POLICY ON SHAREHOLDERS WEALTH: EVIDENCE FROM INSURANCE FIRMS IN THE KENYA
Micheal Muriithi Wanjohi - Master of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
As a company earns profits it can pay it back to its investors as dividends or it can retain it within the business for reinvesting. In determining the dividend policy to adopt, managers concentrate on how to maximize the wealth of shareholders by increasing the value of the firm. Therefore the objective of this study was to determine the effect of dividend policy on the firm value. More specifically, the study sort to evaluate the effect of; regular dividend payout policy, irregular dividend payout policy, non-dividend payout policy on the share price of registered insurance firms in Kenya. The population of interest consisted of all the 49 registered insurance firms in Kenya. Secondary Data was collected from NSE, IRA and published financial statements from the companies’ websites. Secondary data was used in this research and panel data was used to carry out the regression model. A total sample of 9 Insurance Firms was taken into account in this research from the period of year 2008 to year 2015. The model employed was random effect method. From the regression result, it found out that a positive relationship between earnings per share and dividend policy where the results showed that the regular dividend paying firms had more effect while the non-dividend paying firms were least. From the results we noted that retained earning has a negative significant effect on the shareholders’ wealth.
