Differences between dividend policies of foreign owned firms and locally owned firms listed at the Nairobi Stock Exchange

Abstract

Compared to the local firms, multinational firms usually have a high dividend payout and predictable policies. This paper assesses the need to analyze the effect of dividend policies of multinational firms on the overall economic goals of a country, and the need to swap development aid! development finance with profit retention policies. From the Year 1999 to 2005 at the Nairobi Stock Exchange, the researcher selected all firms that actively traded during that period and categorized them into two categories: those with over 51% foreign ownership, known as Foreign owned firms (or Multinationals) and those with less than 51% foreign ownership as Local Firms. In carrying out the analyses of the differences in the means of the two categories, it was found out that there is a difference in dividend payout policies, but not very significant. According to the content analysis, the investment in the MNCs also gives higher dividend yield, which could even be up to 120%. There could also be a high dividend payout ratio among the multinational firms of 4.72 for multinational firms this has lead to probability of higher dividend repatriation from the country. Further analysis, using t-statistics, conclude that there is no significant difference, while other analyses indicate there could be a difference, albeit minor