Board Composition and Dividend Decisions of Companies Listed at the Nairobi Securities Exchange Kenya
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Date
2019
Authors
Naburi, Jackline
Ndede, Fredrick W. S.
Journal Title
Journal ISSN
Volume Title
Publisher
IJCAB Publishing Group
Abstract
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.
Description
An Article Published in International Journal of Current Aspects
Keywords
Board Composition, Directors’ skills, Board independence, Board diversity, Board
Citation
Naburi, J., & Ndede, F. (2019). Board Composition and Dividend Decisions of Companies Listed at the Nairobi Securities Exchange Kenya. International Journal of Current Aspects, 3(VI), 354- 371. https://doi.org/10.35942/ijcab.v3iVI.94