Moderating Effect of Dividend Policy on the Relationship between Capital Structure and Financial Performance of Agricultural Companies Listed at the Nairobi Securities Exchange, Kenya

Beth Wambura () and Dr. Kalundu Kimanzi ()

International Journal of Finance and Accounting, 2025, vol. 10, issue 3, 28 - 37

Abstract: Purpose: The objective of the study was to investigate the moderating effect of dividend policy on the relationship between capital structure and financial performance of agricultural firms listed at the NSE, Kenya. Methodology: A correlation research design was applied. A census survey on six agricultural firms listed at the Nairobi Securities Exchange from the year 2013 to 2022. The study used secondary data collected from audited financial statements of listed agricultural companies at the NSE. The empirical data was coded and analyzed using R-Studio, to establish the relationship between the variables of the study. The moderating effect of dividend policy was tested using the stepwise regression technique by employing a Three-step approach by Baron and Kenny (1986). Findings: The results of the study revealed that 21% and 23% of the changes in the dependent variable can be well explained by the predictor variables without moderating variable and with moderating variable respectively. From the study, Debt has a negative and not significant effect on ROE. Share Capital has a negative and significant effect on ROE and Retained Earnings has a positive and significant effect on ROE. The moderating variable (dividend decisions) had a negative a not significant effect on the relationship between capital structure and ROE. It was concluded that the moderating variable has no significant effect on the relationship between capital structure and financial performance of agricultural firms listed at the NSE. Unique Contribution to Theory, Practice and Policy: The study provides empirical evidence from the agricultural sector in Kenya, which is underrepresented in financial literature. It challenges the universality of some theoretical assumptions, especially regarding the role of dividend in capital structure-performance dynamics.

Keywords: Capital Structure; Dividend Policy; Financial Performance; Moderator (search for similar items in EconPapers)
Date: 2025
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