An Empirical Assessment of Dividend Payout on Growth of Micro and Small Enterprises in Kenya: Effects of the Bird in the Hand Theory
Author(s)
Grace Akinyi Musa , Beatrice Kinanu Anyuki , Sandra Beldine Otieno ,
Download Full PDF Pages: 28-38 | Views: 983 | Downloads: 239 | DOI: 10.5281/zenodo.5235171
Abstract
Research has shown that in making investment decisions, an investor is always required to accept a certain level of risk which is in line with the expected returns. A risk taker is an investor intrigued by the market volatility, viewing it as an opportunity to realize a higher return on their investments. An adverse risk investor prefers lower returns instead of higher ones because the lower returns have known risks unlike the higher returns which have higher risks. Risk neutral investors are those who are not sensitive to risks. These facts notwithstanding, research shows that most Micro and Small Enterprises have not been willing to undertake risks hence their investments in stock dividends have been minimal. This has been attributed to their fear of the future which is uncertain, and also due to negative perceptions developed by them towards engaging in any form of investment, including investing in stock dividends. The main objective of the study was an empirical assessment of the relationship between dividend payout and Growth of MSEs with effects of the ‘Bird in The Hand’ theory. The population of the study comprised of 100 Micro and Small Enterprises located within Nairobi’s Central Business District in Kenya. The study applied a cross-sectional and ex-post facto research design. Data were analysed using logistic regression since the outcome of the study was binary and dichotomous in nature. Findings revealed a significant positive relationship between dividend payout and Growth of Micro and Small Enterprises in Kenya and a positive significant moderating effect of the ‘Bird in the Hand’ theory on the relationship between dividend payout and Growth of Micro and Small Enterprises in Kenya. The study recommended that for MSEs to facilitate their Growth, it was necessary that they invested in a stock paying dividends as proposed by the ‘Bird in the Hand’ dividend theory. The study has bridged the void created by prior studies which hitherto concentrated on other dividend theories including; the residual dividend theory, Modigliani and Miller dividend irrelevance theory and the tax preference theory.
Keywords
Growth of Micro and Small Enterprises, the Bird in the Hand theory, Risk Averse Investor, Dividend Payout,
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