THE INFLUENCE OF LARGE SHAREHOLDERS ON DIVIDEND POLICY AND COMPANY VALUE: EVIDENCE FROM NAIROBI SECURITIES EXCHANGE

Abstract

The influence of large shareholders in organization decision-making processes has attracted significant attention by researchers in recent times. Ownership control through large share concentration is one of the aspects of ownership structure theory and corporate governance mechanism that is increasingly under the focus of researchers especially after the fall of large corporations like Enron in the USA in 2001, scholars have increasingly developed a keen interest in understanding the role of influential shareholders in company decision-making processes. The study used longitudinal data for listed firms during the ten years (2008-2017) and regression analysis was used to study the nature and extent of the relationship. The target population was sixty-six companies that traded shares during the period. The findings of this study indicate that the presence of large shareholders has no significant direct effect on dividend policy and company value, dividend payment significantly influences the firm value and jointly with large shareholder control have a positive complementary effect on company value. Companies listed on the Nairobi Securities Exchange have significantly large shareholders either through individuals or institutions and this suggests, contrary to the shareholder monitoring hypothesis, large shareholders could be entrenched and, unless other complementary corporate mechanisms are present, large shareholders may not act in the best interest of minority shareholders.

Key Terms: Shareholder control, Dividend policy, Capital structure, Firm value