Effect of Financial Crisis on Dividend Payout Policy of Commercial and Services Firms Listed at the Nairobi Securities Exchange

The study sought to establish the effect of a financial crisis on the dividend payout policy of commercial and service firms listed at Nairobi Securities Exchange. The independent variables for the study were real GDP, inflation, profitability, liquidity and leverage. The study employed descriptive research design. Research data was obtained from Nairobi Securities Exchange (NSE) annual reports of commercial and service firms’ financial statements and Kenya National Bureau of Statistics. The results were analyzed using Stata software. The study used annual data financial reports for 8 commercial and service firms listed at Nairobi Securities Exchange since the years 2007-2015. From the results of correlation analysis, there is a positive and statistically significant correlation between real GDP and dividend payout ratio. The study also found out that there is a negative and significant correlation between inflation and dividend payout ratio. Profitability was also found to have a positive and significant association with dividend payout ratio of commercial and service firms listed at Nairobi Securities Exchange. Liquidity was found to have a strong positive and significant association with dividend payout ratio. Finally, leverage had a negative and significant association with dividend payout ratio. The model summary revealed that the independent variables: real GDP, inflation, profitability, liquidity and leverage explains 91.4% of changes in the dependent variable which is dividend payout ratio. Regression results showed that real GDP had a positive and statistically significant relationship with dividend payout policy of commercial and service firms listed at Nairobi Securities Exchange, inflation has negative and statistically significant relationship with dividend payout policy of commercial and service firms while profitability has a positive and statistically significant relationship with dividend payout policy of commercial and service firms listed at Nairobi Securities Exchange. Further, regression .