The relationship between dividend payout ratio and market values of firms listed at the Nairobi securities exchange

Abstract

This study was undertaken with a view of establishing whether there exist any relationship between the dividend payout ratio and market value of companies listed at NSE. Because there was no study done on the same, there was a desire to research on it. With this gap in mind, a study was conducted with an objective of establishing a relationship between dividend payout ratio and market value of all quoted companies at the NSE with regular dividend payout behavior, for the 8 years i.e. 2004 to 2011.With the help of correlation study as a research design, 30 firms listed consistently at NSE including those listed within the years and regularly paid dividends to their shareholders were considered. Secondary data was used which was extracted from published financial statements as published in the NSE Handbook 2008 and 2012, which was analyzed using excel worksheet with focus on correlation model and was presented using tables. The findings of the study revealed that there is a weak relationship between dividend payout ratio and market value. This is in line with the expectations that dividends payout ratio influence the market value. Generally all the 8 years, reported a positive relationship between dividend payout ratio and market value. The prevailing accounting standard, political and economic factors, affect the preparation of published accounts, which determine the market value and dividend payout ratios. Finally similar studies were suggested to be carried out with help of other modules, and also on unquoted companies and a comparison made.