Effect of Dividend Policy Decision on Financial Performance of Private Manufacturing Firms in Nairobi City County

Abstract

The study sought to establish the effect of dividend policy decisions on financial performance of private manufacturing firms in Nairobi City County. The study was guided by the Dividend Irrelevance Theory. The study employed a descriptive research design. The population for this study consisted of 455 enrolled private assembly enterprises. The fiveyear period under consideration was from 2016 to 2021. Using Krejcie and Morgan (1970) formula sample size of 208 was determined. The data was sourced from two primary sources - the finance department of the institutions and the Kenya Association of Manufacturers website. The data was coded, transformed for analysis through the use of STATA software for statistical analysis. The study found that dividend policy has a positive and significant effect on financial performance of private manufacturing firms in Nairobi City County. Higher levels of dividend policy were found to lead to an increase in financial performance. The study recommends for firms to have a healthy level of retained earnings to support their future growth and investment initiatives. Firms should also consider their financial position and other factors when making dividend decisions to ensure they are sustainable.