The Effect of COVID - 19 on Dividend Policy of Firms Listed at the Nairobi Securities Exchange, Kenya

Abstract

Abstract

Covid-19 pandemic hit Kenya on 12th March 2020 and thereby destabilizing the normal functions of the financial markets. The purpose of this study was to establish the impact of the pandemic on dividend policy of firms listed at the Nairobi Securities Exchange (NSE).  The population of the study comprised of all firms which were listed at the NSE for a 4 year period: 2 years (2018 and 2019) represented the before Covid - 19 period while 2020 and 2021 represented the Covid-19 period. Paired samples t test was used to establish whether there were significant differences in dividend policy between the periods – before Covid-19 period and during Covid – 19 period. In terms of findings, the overall picture on the impact of Covid-19 on the dividend policy among listed companies at the NSE, there was a decrease in the mean dividends during the Covid-19 period. Also 36% of the companies did not pay dividends. The paired samples T test showed that the significance level was more than 5%. In terms of segments, 43% of them reported a decrease and the majority reported an increase (57%). The study recommends that companies should endeavour to stimulate activities at the stock markets by increasing dividends so that they can signal positive prospects to the investors. Investors are also advised not to shy off from the stock markets during major shocks such as pandemics as the effect on dividends is positive as evidenced by majority of the segments.

Keywords: Covid-19, Dividend policy, signaling effect