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The Interdependence among Dividend Policy, Investment Decision, Financial Performance and Survival of the Firms in Kenya

Author

Listed:
  • Edmond Mubanani Mukhongo

    (Technical University of Mombasa)

  • Purity Njeri Fadhil

    (Technical University of Mombasa)

  • Charles Guandaru Kamau

    (Technical University of Mombasa)

Abstract

The main objective of this study was to analyze patterns and tendencies in dividend policy. By extensively reviewing existing literature, the research aimed to establish the connections between dividend policy and other important financial aspects. The study's findings clearly indicate that investors who are astute prefer companies that provide higher dividends rather than keeping their earnings. This preference is due to the liquidity benefits that such firms typically provide, which align with the liquidity requirements of investors in various financial markets worldwide. It is important to note that the distribution of dividends significantly affects the speed of adjusting the capital structure. The conflict between the distribution of dividends and strategic financing initiatives impedes the progress of these adjustments. A majority of institutional entities allocate dividends strategically to increase their financial resources by investing in high-yielding ventures identified by corporate management. However, in emerging economies, the utility and effectiveness of dividends as a signaling mechanism and cost-minimizing tool are relatively reduced compared to more mature and well-established capital markets. Additionally, it is worth highlighting that dividend policy has a statistically significant and positive correlation with variables such as firm size, profitability levels, and interest coverage ratios. This emphasizes the complex relationships that exist between dividend policy and these key financial metrics.

Suggested Citation

  • Edmond Mubanani Mukhongo & Purity Njeri Fadhil & Charles Guandaru Kamau, 2024. "The Interdependence among Dividend Policy, Investment Decision, Financial Performance and Survival of the Firms in Kenya," East African Finance Journal, East African Finance Journal, vol. 3(2).
  • Handle: RePEc:cwk:eafjke:2024-13
    DOI: 10.59413/eafj/v3.i2.7
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    Cited by:

    1. Anthony Njoroge Njenga & Cyrus Mwangi & Kennedy O. Okiro, 2026. "An Empirical Assessment of the Effect of Dividend Yield on the Link Between Firm Liquidity and Value of Firms Listed at the Nairobi Securities Exchange," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 15(1), pages 1-1.

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