The Relationship Between Corporate Governance Practices and Dividend Payout of Commercial Banks in Kenya

Abstract

This study has been conducted to investigate the relationship between corporate governance practices on the dividend payout of commercial banks in Kenya. The study considered a functional form relationship between corporate governance practices and dividend payout by using a regression model that related board size, insider holding, board composition, CEO duality, leverage as well as ownership and control to dividend payout. A total of 17 commercial banks in Kenya that paid dividends between 2008 - 2012 were used to determine the relationship.

The findings of the study suggest that 72.7% of dividend payout in Kenyan commercial banks could be explained by corporate governance practices. All the corporate governance variables produced statistically significant values which were positively related to dividend payout in Kenya commercial banks. As a policy recommendation, the government should ensure that the corporate governance practices as outlined by the CMA are followed by companies which in turn will ensure that the dividend payout to investors is optimal.