An Investigation into the Effects of Dividend Policy on the Financial Growth of Advertising Firms in Kenya

Abstract

The effects of dividend policy on corporate financial growth are a major concern of most entities. Whether dividends have an influence on the value of a firm, is an important question in dividend policy. This study aimed at investigating the effects of dividend policy on the financial growth of media firms. This study was conducted in Nairobi at The Nation Media Group Headquarters. Respondents were senior managers, middle-level managers and ordinary shareholders. A descriptive research design was used to describe the nature, behaviour and factors contributing to the study as a case-study approach was adopted. Stratified random sampling technique was used to pick a sample size of 215 respondents to carry out this study. The significance of this study was to formulate dividend policies that suit the financial environment, bring awareness to workers on how to deal with the shareholders on dividends issues and also to assist in the determination of how much debt to be employed in the capital structure. This study revealed that investment policy on dividend pay-out affects the financial growth of a firm through division of earnings between the stockholders and reinvestment in long-term projects. This study concluded that dividend policy is an integral decision in financial management because it maximises shareholder's wealth and has relevance on stock prices and a firm's value. Therefore, this study recommended that the firm should adopt an optimal dividend policy as well as an effective and efficient capital structure, which creates a balance between division of earnings and investment in long-term projects.