The Impact of Dividend Policy on Long-term Investment Performance of Firms Listed With Nairobi Securities Exchange Investment Sector

Abstract

The purpose of the study was to determien the effect of dividend policy on long term perfromance of finance and investment companies listed at the Nairobi Securities Company. To determine the amount to distribute to shareholders, companies use dividend policies. A company's dividend policy lays out the steps used by management to decide how much of a dividend to pay out. Also investing for the long term often produces superior returns since money has more time to develop and expand. Given their importance to the company's financial function, managers put a premium on investment decisions. The study is guided by four theories; dividend irrelevance theory, bird-in-hand theory, agency theory and residual dividend theory. The population of the stduy are the ten listed finance and investmet comapnies. The study revealed a Pearson's correlation coefficient of 0.190, suggesting that consistent payment practices are linked to favorable long-term investment outcomes. Consequently, it can be inferred that within the context of businesses in the NSE investment sector, there exists a weak yet positive correlation between the frequency of payments and the performance of investments over an extended period. Regression analysis was utilized to assess the relationship between the independent variables and the dependent variable of the study. The analysis found an average link between dividend yield and long-term investment success of 0.432, as shown in Table 4.3. Companies included in the investment sector of the NSE had a statistically significant effect of dividend yield on their long-term investment success (p=0.041, less than 0.05). The proximity of R2 to R2, with an adjusted R2 value of 0.401, indicates that the observed R2 of 0.478 is likely not a mere coincidence. Furthermore, the analysis reveals no significant correlation between dividend policy and future changes in investment performance, as evidenced by a significance level of 0.263 (P>0.05). This suggests that dividend policy does not exert a statistically significant influence on the long-term investment performance of firms within the investment sector of the Nairobi Securities Exchange. The research indicated that dividend payment ratio was positively correlated with long-term investment performance among businesses listed at the NSE investment sector, albeit the association was modest. Findings indicate a small but favorable correlation between dividend payment ratio and long-term investment success for companies listed on the NSE investment sector. Firms listed in the NSE investment sector do not show a statistically significant effect on long-term investment success based on dividend payment ratio. Firms listed in the NSE investment sector had a statistically significant effect on their long-term investment success from the average association between dividend yield and investment performance.