Dividend Decisions and Economic Value-Added of Firms in Kenya

One of the company's key purposes is to maximize corporate value. Shareholders will benefit more as the firm's value rises. There is a substantial body of literature on dividend policy as a result of empirical and theoretical research. The research is divided into two main schools of thought: one holds that a company's dividend policy affects its value, while the other holds that it has no bearing on firm value. No consensus has been reached after many years of investigation, and academics do not even agree on the same empirical data. The possible impact of dividend decisions on a company's total wealth and performance has been the subject of numerous hypotheses that have developed over the years, with varying degrees of success. A number of financial theories and models were developed, and they were later used in the business sector. The effects of dividend decisions on the share price of the company and the overall wealth of shareholders remain unclear despite several studies. This study sought to examine the relationship between dividend policy decisions and firm value. Some studies have found a statistically significant positive association between dividend policy and return on equity. It means that improving dividend payments has a positive impact on the company's success. A large number of studies, however, show a markedly unfavorable relationship between firm profitability and dividend payout. Consequently, when corporations pay dividends, their retained earnings are impacted, which affects their internal profitability.