The empirical relationship between dividend and investment decisions of firms quoted at the Nairobi stock exchange

Abstract

This study sought to investigate whether or not there is a relationship between dividend and investment decisions. The major source of data was financial records of publicly quoted companies obtained from the Nairobi Stock Exchange (NSE). Data from the various companies was gathered and analysed using the regression techniques provided by the excel package. The dividend and investment models were regressed and the resultant equations obtained. Each variable present in the model was tested for its significance in the model using the t-statistics. The whole model was then checked to see how much the variables present explain the variations as opposed to other variables not present in the model. The whole model was tested using the adjusted R2. The standard errors for the two models for each company were compared and the results obtained indicate that investments affect dividend decisions. The dividend model was the most favorable in the companies under investigation. The investment variable in the different companies was significant in the dividend model whereas the dividend variable in the investment model was also significant in the investment model. In conclusion it was obtained that a relationship between dividend and investment