Dividend Policy and Financial Performance of Insurance Companies Listed in Nairobi Securities Exchange, Kenya
Loading...
Date
2021
Authors
Kiruja, Vincent Murimi
Mungai, John
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
The profit of a firm can be paid out as
dividends or be re-invested. There are a
number of reasons why the firm should
pay dividends or not. Investors pay
attention to dividends and therefore the
dividend policy behaviour is still an issue
of concern in finance literature. Whereas
some of the insurance companies have
been performing well in terms of assets
growth and profitability, there are other
listed insurance companies whose return
on assets has been dwindling over the
years under study. This was partly
attributed to poor dividend policy. The
research aimed at filling the research gap
by establishing the importance of effective
dividend policy and the link existing
between dividend policy and insurance
companies’ financial performance. The
goal guiding the study are; to determine
the influence of dividend payout ratio,
retained earnings, and dividend yield on
financial performance of insurance
companies listed in the Nairobi Securities
Exchange. A descriptive design was
adopted. Secondary data
from4financial4statements of the Nairobi
Securities Exchange listed insurance
companies4for4the period 2013-2018 was
collected. Descriptive statistics and
regression model using SPSS software
version 2 was used for the data analysis.
The study concluded that dividend payout
does not affect the performance of
insurance companies listed in Nairobi
securities exchange, retained earnings has
a positive significant effect on financial
performance of insurance companies listed
in Nairobi securities exchange, and that
dividend yield has a positive effect on1 the
performance of insurance companies listed
in Nairobi Securities Exchange in financial
terms. The study recommends that
Insurance companies listed in Nairobi
securities exchange should ensure that they
have a good and robust dividend policy in
place that can enhance their level of
profitability and also attract investments.
The study recommends that Insurance
companies listed in Nairobi Securites
Exchange should develop policies and
laws governing dividend payment and
should be strengthened and enforced to
ensure a more frequent dividend payment
in order to increase their market values
through share price increases. It is also
recommended that and investment policy
should be developed and implemented;
this will ensure that the management is not
left to decide on how to use the little
surplus left but would rather be guided by
the investment policy. The board of
directors of insurance firms should be
prudent in declaring dividends as higher
dividend yield could mean that the share
price is underpriced which could affect
future dividends.
Description
An Article Published in International Academic Journal of Economics and Finance
Keywords
Dividend policy, Financial performance, Assets growth, Profitability, Dividend payout ratio, Retained earnings, Dividend yield
Citation
Murimi, K. V., Mungai, J (2021). Dividend policy and financial performance of insurance companies listed in Nairobi securities exchange, Kenya. International Academic Journal of Economics and Finance, 3(6), 405-422.