The impact of dividend payments on shareholders' wealth the case of quoted companies in Nairobi stock exchange

Abstract

The study set out to examine whether dividend payment has any effect on the share prices, at the companies quoted in the Nairobi Stock Exchange (NSE) from the period 1997-2000. The study was specifically motivated to unearth whether share prices change positively or negatively with dividend payment. Twenty days surrounding the dividend announcement date were studied. The major source of data was financial records of publicly quoted companies. Data from various companies was gathered and analysed using XRit = Rit - E (Rit), 2-day excess price and t-statistics. The results obtained and discussed in the report show that shareholders preference for dividends varies from one company to the other. Cumulative Excess Price (CEP) and t-statistics for the companies show negative effect of dividend payment on share prices. However the degree of variation differs showing client indifference to dividend preference.