Dividend Decisions Research Articles

الدور الوسيط لكفايات نظم ذكاء الأعمال في العلاقة بين المناعة التنظيمية ونجاح القرارات المالية "دراسة تطبيقية على شركات صناعة الأغذية في قطاع غزة" (Mediating Role of Business Intelligence Systems Competencies in the Relation Between Organizational Immune and the Success of Financial Decisions ‘An Applied Study on Food Industry Companies in the Gaza Strip’)

Arabic Abstract: هدف البحث لاختبار وتحليل علاقتي الإرتباط والأثر بين أبعاد المناعة التنظيمية (التعلم التنظيمي، الذاكرة التنظيمية، الحمض النووي) ونجاح القرارات المالية (قرار التمويل، قرار الإستثمار، قرار توزيعات الأرباح)، بوجود كفايات ذكاء الأعمال (الإدارية، التقنية، الثقافية) متغيرا وسيطا، إذ تم تنفيذ الجانب التطبيقي في شركات صناعة الأغذية في قطاع غزة، ولتحقيق أهداف البحث تم استخدام المنهج الوصفي التحليلي لملاءمته لطبيعة هذه الدراسة، وقد تم اختيار (30) شركة كعينة عشوائية، موزعة على جميع قطاعات صناعة الأغدية، وتم استخدام الإستبانة كأداة رئيسية لغرض إتمام هذه الدراسة، وبذلك تم توزيع (150) إستبانة، وقد تم إسترداد (133) إستبانة، ما يمثل نسبة (88.8%) كنسبة إسترداد، وكان توزيع الإستبانات يستهدف بشكل أساسي (مدير، مدير مالي، رئيس قسم، المهندسين)، كما استخدم الباحث الحزمة الإحصائية للعلوم الإجتماعية (SPSS) لتحليل البيانات الأولية التي تم تجميعها من مفردات مجتمع البحث. قد توصل الباحث لمجموعة من النتائج المتعلقة بمجال التطبيق أهمها: تم إثبات وجود علاقة ذات دلالة معنوية بين المناعة التنظيمية بأبعادها، وكفايات نظم ذكاء الأعمال، وكذلك وجود علاقة ذات دلالة معنوية بين استخدام كفايات نظم ذكاء الأعمال ونجاح القرارات المالية في المنظمات موضع الدراسة، وتبين أيضا وجود علاقة وأثر ذات دلالة معنوية بين المناعة التنظيمية بأبعادها ونجاح القرارات المالية، وأن المناعة التنظيمية بأبعادها تفسر ما نسبته (56.9%) من التغير في القرارات المالية. قد أوصى الباحث بأنه ينبغي على الشركة المبحوثة التوجه نحو تطوير البنى التحتية، وتطويرها لتوفير الكفايات الضرورية لنظم ذكاء الأعمال، واستخدامها في جميع جوانب العمل، واعتماد برامج تدريبية وتطويرية بهدف زيادة قدرة العاملين، وتطويرها باكتساب معارف، ومهارات للأفراد جديدة، وضرورة تقوية نظام المناعة التنظيمية في جميع أقسام، ودوائر الشركة باعتماد الربط الإلكتروني، وتوسيع قاعدة إتخاذ القرارات المالية والحد من المركزية من خلال إطار تنظيمي يعطي صلاحيات أوسع للإدارة المعنية بتخطيط مالي يسمح بإتخاد القرار. كلمات مفتاحية: كفايات ذكاء الأعمال، المناعة التنظيمية، القرارات المالية. English Abstract: The aim of the research is to test and analyze the correlation and impact between Organizational Immunity represented (Organizational Learning, Organizational Memory & DNA) and Financial Decisions success (Financing Decision, Investment Decision & Dividend Decision), in the presence of business intelligence competencies (administrative, technical, cultural) as an intermediate variable, The applied aspect was implemented in food industry companies in the Gaza Strip. To achieve the objectives of the research and to suit its nature of this study, a descriptive analytical approach was used. Thirty (30) companies distributed across all food industry sectors were selected as a random sample. Therefore, a questionnaire was used as a main tool for the purpose of completing this study, (150) questionnaires were distributed and (133) questionnaires returned which makes recovery percentage of (88.8%). the Distribution of questionnaires was mainly aimed at for (director, financial manager, department head and engineers). Researcher used Statistical Package for Social Sciences (SPSS) to analyze the collected primary data of the research. The researcher has reached a set of results related to the field of application, the most important of which are: the existence of significant relationship has been proven between organizational immunity with its dimensions and competencies of business intelligence systems, a significant relationship between the use of business intelligence system competencies and the success of financial decisions in the organizations under study, existence of a relationship and significant impact between organizational immunity and its dimensions and the success of financial decisions, finally, organizational immunity and its dimensions explains a rate of (56.9%)of the changes in financial decisions. The research recommended that the researched company should consider building and developing the infrastructure to provide the necessary competencies for business intelligence systems, besides using use them in all aspects of work, and adopt training and development programs to increase workers capacity and development and acquiring new knowledge and skills for new individuals. There is a need to strengthen the organizational immune system in all departments by adopting electronic connectivity, expanding the base of financial decision-making and reducing centralization through an organizational framework that empowers the department concerned with decision-making financial planning.

Factors influencing dividend decisions of Indian construction, housing and real estate companies: An empirical panel data analysis

AbstractThis paper makes an attempt to identify the factors influencing dividend policy by analysing data of 125 companies enngaged in housing, construction and real estate business in India. These companies are selected which have paid dividend throughout the study period. Most of these companies are listed with either Bombay Stock Exchange or National Stock Exchange. This paper applies three alternative methods to verify and validate the results obtained from each other method. These methods are fully modified ordinary least squares (OLS), dynamic OLS and generalized methods of moments (GMM). Empirical findings of this research article depict that firm size, leverage and liquidity are significantly affecting dividend payout ratios and these variables have a negative relationship with the dividend payout ratio of the selected real estate firms. The results indicate that firm risk as measured through price–earnings ratio (P/E ratio) has a positive association with dividend payout ratio of selected real estate firms. Lagged dividend payout ratio used in the GMM test as an exogenous variable is showing positive significant association with dividend payout ratio. A firm's growth shows a negative relationship with dividend payout ratio using GMM technique. The present study shall be useful to different stakeholders of real estate companies. Various significant determinants as identified can be used by management for designing optimum dividend policy and providing maximum benefits to existing shareholders. Similarly existing as well as prospective shareholders may predict the future payment of dividend and accordingly they may take investment decisions in these firms, as the future fund's requirement of a firm depends upon dividend payment and retention ratio.

Factors affecting the dividend policy of non-financial joint-stock companies in Ukraine

Dividend policy, as part of corporate governance, is largely dependent on the institutional environment in which companies operate. The study aims to determine factors affecting dividend policy in the conditions of the Ukrainian underdeveloped stock market, legal insecurity of minority shareholders, high cost and concentration of capital. For this purpose, hypotheses about the impact of a company’s financial state, size, business risk, and ownership structure on dividend payments were tested using a sample of 58 Ukrainian non-financial public joint-stock companies and applying Interactive tree classification techniques (C&RT). The resulting classification model for predicting dividend decisions correctly classifies 92.86% of companies that paid dividends and 93.3% of companies that did not. The findings, based on the classification tree and importance scale, prove the hypothesis that companies in which individuals and institutional investors have a controlling interest are more likely to pay dividends than other non-state companies. The financial indicators accurately classify only those firms that do not pay dividends, and business risk does not affect classification accuracy at all. The paper substantiates the ways of using the study findings for economic regulation, protection of minority shareholders’ rights, and proliferation of modern corporate governance practices.

CEO and CFO equity compensation and dividend payout over the firm lifecycle

We examine the separate and joint effects of CEO and CFO equity compensation on the dividend payout decision, taking into account changes in the relationship over the firm's lifecycle. Compensation contracts and dividend payout both are used to reduce agency costs, which change over a firm's lifecycle. Studies report a negative association between CEO equity compensation and dividend payout, suggesting a substitutionary relationship. Our results show that when the two are considered jointly, CFO equity compensation dominates CEO compensation, indicating the need for sophisticated financial expertise in the dividend decision. The relationship appears only in mature firms, signifying that agency problems are of most concern during the mature stage of the firm lifecycle.

Dividend Policy as a Mechanism to Protect Investors: Evidence from Brazil

We investigated the effect of dividend decisions on the earnings management (EM) practice of Brazilian companies. This association is based on agency theory, since free cash flow, if not employed in projects of shareholders’ interest, can be expropriated by managers and used for their own benefit. By examining a sample of 2,600 non- financial publicly and privately held companies, from Standard & Poor's Capital IQ database, we found evidence to support the hypothesis that dividend-payers firms show a less aggressive earnings management than non-payers. We also conclude that differences in institutional transparency and investor protection in a country level does not play a significant role in this context.

Mandatory Dividend Policy, Growth, Liquidity and Corporate Governance: Evidence from Chile

Chilean publicly listed companies are required by law to pay out a minimum 30% of distributable earnings after taxes as dividends on common stock. The study extends Lintner’s [Lintner, J (1956). Distribution of incomes of corporations among dividend retained earnings and taxes. American Economic Review, 46, 97–113.] model of dividend smoothing and Banerjee [Banerjee, S, VA Gatchev and PA Spindt (2007). Stock market liquidity and firm dividend policy. Journal of Financial and Quantitative Analysis, 42(2), 369–398.] logistic model of the likelihood of a firm paying a dividend to investigate the signaling, liquidity, corporate governance, and information risk-based theories of dividends. The results show that Chilean firms’ excess dividends are smoothed in relation to the prior period level of excess dividends, and lagged earnings do not drive excess dividends even though the mandatory minimum dividend is defined in terms of lagged earnings. This insight establishes that dividend decisions regarding the size of the excess dividend and the likelihood of paying an excess dividend are distinct from the mandatory dividend payment. Additionally, the size of excess dividends and their likelihood are higher at firms with higher growth opportunities, a result consistent with the use of excess dividends as a signaling device. Results also demonstrate that greater transparency is associated with a greater likelihood of paying an excess dividend, but transparency does not drive policy regarding the size of the excess dividend. Moreover, the corporate governance mechanism creditor monitoring influences the size of excess dividends but not the likelihood of paying excess dividends. These results have implications for securities regulators evaluating the pros and cons of a mandatory dividend policy to protect minority shareholders in emerging markets.

Determinants of banks’ dividend payment decisions: evidence from MENA countries

Purpose This paper aims to investigate bank-specific determinants affecting the dividend policy of commercial banks listed in the Middle East and North Africa (MENA) region countries. Design/methodology/approach The study uses pooled and panel tobit and logit regression analyses based on 16-year unbalanced data with 1,593 firm-year observations collecting from 117 commercial banks listed in 11 MENA countries. Findings The results indicated that the main bank-specific factors affecting dividend payment decisions are bank size, profitability, capital adequacy, credit risk and bank age in the context of the MENA emerging markets. In addition, the analysis showed that the yearly dummy for the global financial crisis (2008–2009) has a significant negative effect, while the yearly dummy for the Arabic spring crisis (2010–2011) has no significant effect on the dividend payment decision of banks listed in the MENA region. Furthermore, the growth opportunity is not one of the key factors affecting dividend policies by banks in MENA emerging markets. Considering this information, it is reasonable to conclude that MENA region banks’ dividend decisions follow investment decisions. In other words, the dividend decisions and investment decisions are independent of each other. The findings support theories (hypotheses) of dividends such as residual, signalling, regulatory pressures, transaction cost and lifecycle. Research limitations/implications This study is restricted to a sample of one type of financial firm, conventional commercial banks listed in the MENA markets because of the problem of missing data and limited information on other financial firms for the same period, particularly Islamic banks. Moreover, the focus of this study was on factors that are considered bank fundamentals. However, ownership variables were not included in the study because of unavailability. Practical implications The results of this study have several important implications for banks’ dividend policymakers, regulators, analysts and investors. Dividend policymakers in MENA emerging markets seem to use residual dividend policy, in which they distribute dividends according to what is left over after all acceptable investment opportunities have been undertaken. These inconsistent, unstable dividend policy trends make it difficult for investors to predict future dividend decisions. Further, this practise may convey information to shareholders about a lack of positive future investment opportunities. This may negatively affect the share value of banks. Acquiring a broad understanding of the dividend behaviour of MENA banks enables regulators to take more effective regulatory actions to protect shareholders and depositors. Finally, the results of this study can help analysts and investors build their dividends predictions and investment strategies. Originality/value The banking sector plays a disproportionately large role in the development of emerging economies. Therefore, this study is one of the first to examine a large cross-country sample of MENA banks (117) for an extensive period (2000–2015). The study includes both the Global financial crisis and Arab uprising periods, including after the liberalization and recent economic reforms and structural changes in financial sectors across MENA countries.

The Dynamics Between Dividends, Financing and Investments: Evidence From Jordanian Companies

Dividend decisions, Financing decisions and Investment decisions are three very imperative decisions taken by a firm. The effect of these decisions is on the performance of the firm which subsequently effects the valuation of the firm. These decisions in a firm are also influenced by the growth and status of the respective economy.The current research attempts to analyze the dynamics between these three major decision areas and also assess their relationship with the market value of the firm. These dynamics are further tested against the economic growth of the respective economy. Annual data for 50 companies from Jordanian economy for the time period 2007-2018 is used to achieve the objective. Basic and advanced statistical techniques such as regression analysis and Vector Auto Regression (VAR) have been used in the study. The sample involved 50 Jordanian companies.The study found that the value of the firm is affected by three key decisions (value drivers) of dividend, investment and financing and this effect is best measured at a lag of two years. Also the combined effect of the three value drivers is more than standalone effect.

Optimal periodic dividend strategies for spectrally positive Lévy risk processes with fixed transaction costs

We consider the general class of spectrally positive Lévy risk processes, which are appropriate for businesses with continuous expenses and lump sum gains whose timing and sizes are stochastic. Motivated by the fact that dividends cannot be paid at any time in real life, we study periodic dividend strategies whereby dividend decisions are made according to a separate arrival process.In this paper, we investigate the impact of fixed transaction costs on the optimal periodic dividend strategy, and show that a periodic (bu,bl) strategy is optimal when decision times arrive according to an independent Poisson process. Such a strategy leads to lump sum dividends that bring the surplus back to bl as long as it is no less than bu at a dividend decision time. The expected present value of dividends (net of transaction costs) is provided explicitly with the help of scale functions. Results are illustrated.

VALUE OF THE FIRM: INFLATION AND ROLE OF DIVIDEND DECISION MEDIATION

The objective of this study was to determine the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on dividend decision. Besides, to prove the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on firm value through the role of dividend decision mediation and to determine the direct effect of dividend policy on a value of the firm in the consumer goods industry sector. The population is companies in the consumer goods industry sector listed on the IDX during the period 2010-2018. The sampling method uses purposive sampling technique — the total sample of 38 companies using 342-panel data. The analytical method used is path analysis. The results showed that insider ownership and investment opportunity set (IOS) significantly influence dividend decision. However, leverage and inflation do not affect the dividend decision. Also, insider ownership and inflation have a significant effect on the value of the firm, but leverage and investment opportunity sets (IOS) do not affect. Dividend decision affects the value of the firm; besides, dividend decision is proven to significantly play a role in mediating the influence of insider ownership and investment opportunity sets (IOS) on the value of the firm.

Does political instability influence dividend payout policy: evidence from Tunisian Stock Exchange?

PurposeThe purpose of this study tests whether political instability influence financial decision-making behavior of Tunisian-listed firms, in particular dividend payout policy.Design/methodology/approachThis paper uses dividend payout decisions announced over the period 2008–2015 by nonfinancial firms listed on the Tunisian Stock Exchange. A logistic regression is applied to analyze the relationship between political instability and dividend payout decision “changes. These latter are: past non-payers” dividend initiation, past payers' dividend termination, dividend payout “increasing and dividend payout” decreasing. Political instability variables used are as follows: number of changes in government head and dummy variables indicating the changes of ruling party and election year.FindingsThis study shows that government head changes are positively related to dividend initiation decisions while changes in ruling party are negatively related to termination dividend decisions except for family controlled ones. These firms are more likely to stop dividend on period of ruling party changes. Moreover, firms become unwilling to increase dividend payment on the period of political instability (changes in ruling party and government head and elections) and become willing to decrease dividend payment only when the government head changes.Practical implicationsThe empirical findings contribute to the current debate on the signaling power of dividend policy in emerging market where raising equity capital is difficult and controlling shareholders prefer reinvest benefit to pay dividends. In addition, this study has important implications for regulators and governments struggling to design policies to improve investors' confidence and boost market activity. Indeed, investors may use corporate payout as a signal for better governance.Originality/valueTo the author' best knowledge, this paper is the first to investigate and to compare the effect of three political instability sources; government head changes, changes in ruling party and elections, on dividend payout decision changes. This paper provides evidence that firms facing political unstable environment seek to achieve two goals when they make dividend policy: reducing financial distress probability and attracting minority owners.

Do Board Traits Influence Firms’ Dividend Payout Policy? Evidence from Malaysia

The study aims to investigate factors that determine dividend payout policy using 336 non-financial firm year observations covering the period 2005 to 2016 in Malaysia. We found a significant positive relationship between corporate board size, board members average age, board tenure and dividend payout policy. We also found a strong negative effect and statistically insignificant relationship of board diversity, board independence, CEO duality and dividend payout policy. Additional, financial leverage has a negative effect on dividend payout policy. It is also noticed that firms with diverse boards are more likely to pay dividends and tend to pay larger dividends than those with non-diverse boards. Our results suggest that board diversity has a significant impact on dividend payout policy. Impact of board diversity on dividend payout policy is particularly conspicuous for firms with potentially greater agency problems. Our findings are consistent with the argument that corporate board traits enhancement positively affect the dividend payout policy which is beneficial for shareholders. This study offers useful insights into the current global debate on board traits and its implications for firms. The dividend payout policy signals good news to investors. Corporate board traits and firm's financial decision are the factors that disrupt the dividend decision. © The Author(s).

On the dual risk model with diffusion under a mixed dividend strategy

Inspired by the work of Zhang and Han (2017), this paper investigates a dual model with diffusion where dividends are paid under a mixed strategy. This strategy is composed of two parts: dividends will be paid continuously at a fixed rate α > 0 as long as the surplus process is above a fixed threshold level b > 0; for a pre-specified sequence of strictly increasing periodic dividend decision times {Zj}j ≥ 1, whenever the surplus level observed at Zj is above b, the excess value will also be paid out as dividend. In addition, ruin is declared when the observed surplus equals to 0 for the first time. The integro-differential equations satisfied by the expected present value of dividends paid up to ruin (i.e., V(x; b)) and the Laplace transform of the ruin time (i.e., Φ(x; b)) are derived. The solutions of V and Φ are constructed by the method of inverse Laplace transform and through some auxiliary functions. Finally, several numerical examples are provided to illustrate our results.

Firm Liquidity and Dividend Payments: A Panel Analysis of Financial and Real Sector Firms in Nigeria

This study examined the relationship between firm liquidity and the dividend payments of listed companies in Nigeria on one hand, and made a comparative analysis of this relationship between the financial and real sector firms, on the other. The study employed panel least squares regression to analyze the data of 30 listed firms (15 each drawn from the financial and real sectors of the Nigerian economy). Specifically, the study examined the effect of five liquidity and funds flow variables: current ratio (CUR), profit after tax (PAT), earnings per share (EPS), sales/gross earnings (SAL) and debt-capital ratio (DCR) on the dividend payments (DPS) of the firms under study for the period 2008 – 2017. Findings from the study show that using the fixed effect model results for the financial sector firms, CUR and PAT have positive and statistically significant effects on DPS while the rest ( EPS, SAL and DCR) have negative and statistically insignificant effects on DPS. However, using the random effect model results for the real sector, the CUR has a negative but statistically insignificant effect on the DPS while PAT and SAL have positive and statistically significant effects on DPS. EPS has a positive but statistically insignificant effect on DPS while DCR has a negative but statistically insignificant effect on the DPS. It is concluded that liquidity has significant effect on dividend payment of both the financial and real sector of the Nigerian economy. Furthermore, a comparative analysis of the effect of liquidity on dividend payment of financial and real sector firms shows that though liquidity affects the dividend policy of both the financial and real sector firms in Nigeria, the effects are not uniform in the two sectors. In the financial sector, liquidity ratio (CUR) has a positive and statistically significant effect on the dividend payments of financial sector firms, while in the real sector, it has a negative and statistically insignificant effect on it. Only the profit after tax has positive and statistically significant effect on dividend payments in both financial and real sector firms.A comparative analysis between the financial and real sector firms show that liquidity in terms of current ratio and profit after tax have positive and significant effects on dividend payments among the financial sector firms while profit after tax and sales have positive and significant effects on real sector firms. The study recommends that in taking dividend decisions, financial firms need to manage their liquidity position well and ensure profitability while real sector firms should focus more on their sales and profit after tax.

Firm performance and ownership structure: Dynamic network data envelopment analysis approach

This paper applies dynamic network slacks‐based data envelopment analysis to measure financial performance based on the interrelationship among investment, financing, and dividend decisions. The empirical results show that financial performance is determined simultaneously by the efficiency of decisions, and sample firms have good performance in investment stage, but need to improve their financing and dividend policies. The proposal financial performance measure explains the multicriteria of decision‐making rather than the single financial ratios. Besides, the research contributes a novel on the significant relationship between firm's ownership structure in the form of managers, government and foreign shareholders, and the firm's financial performance.

Factors that drive dividend payout decisions: an investigation in the context of Bangladesh

Generally, dividend policies guide the financial rewards of the shareholders. It is often a challenging decision for companies to determine the appropriate level of dividend for the shareholders. While some past studies argue that microeconomic factors drive the decision of dividend policies, many other researchers claim that it is the macroeconomic factors of a country which ultimately influence the dividend payouts. However, there is a paucity of research in this area for emerging countries like Bangladesh. This study thus examines impacts of a set of pre-determined microeconomic and macroeconomic factors upon cash dividend payouts by analysing a sample of listed firms of the Dhaka Stock Exchange (DSE), Bangladesh. Findings are analysed based on liquidity, leverage, growth, and size of the sample firms for microeconomic factors; while, macroeconomic factors are analysed upon dividends on an average basis. The results provide policy implications for shareholders, management, policymakers and the government of Bangladesh.

The effect of dividend payouts on future earnings

The conventional expectation of the relationship between the level of dividend payout and future earnings growth, based on established finance theories, is that it is negative. This expectation stems from the perceived attractiveness of having enough available retained earnings to fund any potential future growth opportunities. However, research performed in various markets at the turn of the century has challenged this belief. This paper seeks to update this theory by investigating the relationship in a more current dataset, from 1988 to 2014. Furthermore, given the investment opportunities within emerging markets, the dataset pertains to South African listed companies. Assessing two different earning measures, over multiple years, a multivariate regression analysis revealed a statistically significant positive relationship between dividend payout and future earnings. Dividend payout decisions are seen by investors as a predictor for future value growth and, as such, management should be aware of their associated dividend distribution decisions.

Should Bank Dividends Be Regulated? What Is the Long-Term Historical Evidence?

The issue of bank dividend regulation has become highly controversial as the stress induced on bank capital during the 2008 financial crisis and the covid pandemic created a demand for enhanced regulation and restrictions on bank dividend payments. This paper examines this issue from a historical perspective by analyzing the dividend decisions of a sample of central-reserve-city banks during the Great Depression and its aftermath to 1973, and in particular the active risk management role that dividend policy may have played for study banks. Dividend policy was used to balance the interests of stockholders and depositors, and to preserve the long-term solvency of the bank. Overall our study results show that despite an initial reluctance to cut dividends, banks cut dividend levels by 24% in 1932 and by 12.7% in 1933 (in median terms). Post-Great Depression dividends remained at depressed levels through most of the 1930s and 1940s. Our study results indicate that this period of depressed and relatively constant dividends allowed banks to rebuild capital levels, which had fallen sharply with the Great Depression. Capital rebuilding post-depression represented risk-shifting in favor of depositors and likely contributed to the stability of the U.S. banking system in the post-depression era.

Monetary Loosening and Dividend Policy: Evidence from Vietnamese Stock Market

Vietnam is a promising laboratory to examine the effect of monetary loosening policy on corporate dividend decisions due to the following reasons: (1) Vietnamese government conducts monetary loosening policy continuously between 2007 and 2017; (2) the monetary policy relies mainly on money supply; and (3) credit channel is the dominant monetary transmission channel. With a research data including 4,493 observations from 2008 to 2017, we find that both the choice to pay dividends and dividend payout ratio are positively affected by money supply and this effect is mitigated by corporate cash holdings. In addition, money supply is positively related to speed of dividend adjustment.

Board Composition and Dividend Decisions of Companies Listed at the Nairobi Securities Exchange Kenya

Boards play a vital role in the field of corporate governance in corporate by acting as the overall governing body on all affairs of an organization. Dividend decisions determine the amount of retained earnings that serve as an internal source of finance for most listed companies. The main purpose of this study was to determine how board composition affected dividend decisions of companies listed at the Nairobi Securities Exchange. The study was guided by the following specific objectives: to determine the effect of Director Skills on dividend decisions of companies listed at the Nairobi Securities Exchange, to establish relationship between board independence and dividend decisions companies, listed at the Nairobi Securities Exchange, to examine the effect of board diversity on dividend decisions of companies listed at the Nairobi Securities Exchange and to investigate the effect of board tenure on dividend decisions companies listed at the Nairobi Securities Exchange. The study was anchored on the following theories: agency theory, stakeholder’s theory and stewardship theory. The study adopted a descriptive research design. The population of this study consisted of 700 top management staff drawn from all the 64 firms listed at Nairobi Securities Exchange. Stratified random sampling technique was used to select the sample. The sample size consisted of 254 top management staff of all the 64 listed firms at Nairobi Securities Exchange. The study used both secondary and primary data. Primary data was collected using questionnaires which were structured. Collected research data was analyzed using Statistical Package for Social Scientists software. The analysis was done using both descriptive and inferential statistics. This study provides an objective assessment of the available data and studies regarding the effect of board composition on dividend decisions of companies listed at the Nairobi Securities Exchange. The findings are appropriate and relevant for seeking a solution to combating poor board compositions among listed companies which improve their dividend decisions. This study has intellectual importance especially to other companies not listed on Nairobi Securities Exchange but facing similar problems with their board composition. It provides essential information for scholars seeking a wide variety of options towards approaching the issue of board composition and dividend decisions of companies. At 5% level of significance, directors’ skills, board independence and board tenure were found to be statistically significant while board diversity was not significant. The study used the F- statistic to test the overall significance of the regression model and the model was found statistically significant and suitable for this study. The model had an R2 of 0.7769 implying that variations in the four independent variables accounted for 77.7% of variations in the dependent variable which was further proof that the model was statistically significant and suitable for the study since it explained nearly all the variability of the dependent variable. It is against this backdrop that this research study arrived at conclusions including that profitability had the greatest influence on dividend payout for firms listed at the NSE and recommended among others, that companies listed at the NSE observe and manage well their policies dealing with the four independent variables. Finally, the study made various recommendations among them, further similar research using multiple economic factors. This will enable a thorough research as it gives a wholesome approach to establishing determinants of dividend payout for firms listed at the NSE.