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EFFECT OF DIVIDENDS POLICY ON FINANCIAL PERFORMANCE OF FIRMS LISTED ON THE RWANDA STOCK EXCHANGE

1*Jeannine Mauwa, 2*Prof. Gregory. S. Namusonge and 3*Prof. Silas Onyango

1*School of Entrepreneurship Procurement and Management, Jomo Kenyatta University of Agriculture and Technology

P. O. Box 62000, 00200 Nairobi, Kenya.

2*School of Entrepreneurship Procurement and Management, Jomo Kenyatta University of Agriculture and Technology

3*School of Business, KCA, Kenya.

Corresponding Author email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

CITATION: Mauwa, J., Namusonge, S., G., and Onyango, S. (2016). Effect of Dividends Policy on Financial Performance of Firms Listed on The Rwanda Stock Exchange. International Journal of Economics and Finance. Vol. 5 (4). PP 1 – 16

ABSTRACT

This study sought to appraise the effect of dividend policy on financial performance of firms listed on RSE. Both primary and secondary data were used by the study. The study adopted descriptive research design and the population was all the six companies listed in the Rwanda Stock Exchange (RSE). A census survey was conducted on all the six listed firms and purposive sampling technique was used to sample the respondents to participate in the study. Data was analyzed using descriptive statistics, correlation analysis and regression analysis using SPSS version 20. The study findings indicated that dividend policy is positively associated with ROA. Furthermore, dividend policy is positively associated with ROE. The regression results indicated that the relationship between dividend policy and both ROA and ROE is positive and significant. Based on the study findings, the study concluded that dividend policy is positively and significantly associated with both ROA and ROE and that dividend policy explains a larger change in ROE than in ROA. Furthermore, the study also concluded that dividend policy is positively and significantly related to both ROA and ROE. In general, dividend policy is positively and significantly related to financial performance of firms listed at the RSE.The study recommends that firms listed at the RSE should improve their dividend policy as it leads to improved financial performance. The firms should operate under established and regularly observed dividend policy and also pays dividends in correlation with its value.

Key words: Dividends policy, financial performance, Rwanda stock exchange, ROA, ROE

 

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