Effect of dividend policy on the value of the firm: A case of Coperative Bank of Kenya limited

Abstract

This study sought to find out the effect of dividend policy on the value of the listed firm .: This covered various dividend policies that may be adopted by various commercial organizations. It als0 determined how the various dividend polices adopted affected the various measures of shareholder's wealth including DPS and MPS . However the main focus was Cooperative Bank Limited which despite it continued success has not brought a good return on investments of the shareholders who bought its shares upon its enlistment. This study thus sought to find out if the policy currently adopted has an effect on investor's wealth and what effect adopting a constant payout ratio or a constant dividend per share would have on investor's wealth. This research project took a descriptive design in form of a case study design and its study population was the respondents of Cooperative Bank Limited. In addition a systematic sampling method of sample election was used to select a sample of 100 respondents. Data was analyzed using descriptive statistics including frequencies and percentages to describe variable characteristics and other qualitative factors and found out that 50% of respondents agree that a form of dividend distribution affects the value of the bank. In addition less than 50% of the respondents agree that the forms of dividend distribution are well communicated. AI 0, 37.5% of the respondents agree that the DPS affects the value of the share as measured by MPS . Presentation of data was through bar graphs and pie charts.

From the findings the researcher concluded that the bank should consider adopting the other dividend policies for example constant payout plus extra. There is need for the bank to vary the forms of dividend payment not only in cash forms. Also, the bank should clearly communicate the forms and the dividend policies to shareholders. More emphasis should be given to the MPS than DP by the bank because 37.5% of the interviewees disagree valuing a share in DPS more than MPS.