SHARE PRICE REACTION TO CASH DIVIDEND ANNOUNCEMENT: AN EVENT STUDY OF LISTED FIRMS IN KENYA
SHARE PRICE REACTION TO CASH DIVIDEND ANNOUNCEMENT: AN EVENT STUDY OF LISTED FIRMS IN KENYA

Summary/Abstract: This study aimed to establish the effect of cash dividend announcement on share pricereaction of the firms listed on the Nairobi Securities Exchange (NSE). This study usedEvent Study methodology with purely secondary drawn data from 24 firms listed on theNSE who meet the study threshold with an event window of eleven (11) days during theyear 2008-2013. The study adopted the descriptive research design and sampling designbeing purposive. STATA version SE12 was used to produce a descriptive analysis. Thefindings indicate that the share price reaction to dividend announcement is positive for adividend increase and negative for dividend decrease and constant for the constant dividend.The study therefore recommends that the effect of the dividend on the firm’s shareprice is very crucial for not only the literature but also for the regulation and supervisionof the capital market and that further development of accounting standards, increasedauditing skills, and advances in investor education will likely make dividends even moreimportant in the future. Following these findings, it would be useful to also consider thefollowing directions for future research on whether there is any joint effect of cash dividend,bonus issues, and right issues on the share price of firms listed on NSE.

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