INTERNATIONAL JOURNALS OF ACADEMICS & RESEARCH ISSN: 2617-4138 IJARKE Business & Management Journal DOI: 10.32898/ibmj.01/4.2article06 www.ijarke.com 38 IJARKE PEER REVIEWED JOURNAL Vol. 4, Issue 2 Nov.’21 – Jan. 2022 Effects of Dividend Policy on Shareholders Wealth Maximization of Blues Chip Firms Listed at Nairobi Securities Exchange Master Oseko Vincent, Kisii University, Kenya Dr. Asenath Maobe, Kisii University, Kenya Dr. Joshua Wafula, Kisii University, Kenya 1. Introduction The cardinal objective of a company's formation is wealth creation for compensating owners. Dividend policy is deemed imperative for any corporation since it is used as a signaling mechanism to the potential external investors on a company's solidity and growth (Baker, Kilincarslan, & Arsal, 2018). Management's ability to generate more revenues and initiate dividends is what shareholders and potential investors look into before risking their hard-earned capital for investment purposes in a given company. Unanticipated alteration of dividend payment should worry the management about the reactions expected from the different clientele of shareholders and potential investors. Potential investors, most of whom are green in the finance field, expect stability of dividend payments and that irregular dividend payments will stir up confusion on the company's performance in financial markets. Ordinary investors’ beliefs that, a high-paying dividend company with regular payments is a well-performing company (Taofeek et al., 2019). This will, in return, attract more prospective investors to buy shares at the current market price after the dividend announcement period. Dividend payment plays a crucial role in attracting potential investors to buy company stocks (Kuhlmann, 2018). The higher dividend paying firms attracts more investors since it signals its financial strength to generate profits. Hence, the dividend payment is perceived to maximize shareholders' wealth manifested in shares' market price (Nyaboke, 2015). Companies distributing high dividends will profoundly impact their market price per share; hence, the company's sound performance in the eyes of risk-averse and risk-neutral investors. Areri et al. (2018) defined dividends as a fraction of the business's net earnings distributed to its owners. Therefore, a dividend is compensation advanced to equity stockholders on the invested amount in a given company. On the other hand, dividend policy is the management's decision policy concerning the amount of earnings put aside for payment to the shareholders as dividends (Zayol, Mya, & Muolozie, 2017). Dividend policy allows for dividends distribution when a firm has no profitable projects and relays information on the company's imminent projections to capital markets. In Malaysia, Hashim & Davidas (2018) determined the association amongst dividend policy and wealth of shareholders on 200 firms listed at Bursa Malaysian Stock Exchange Market. The study findings revealed that dividend payout ratio influences the wealth of shareholders. They also found out that paid-out dividends have a positive significant impact on market price share. INTERNATIONAL JOURNALS OF ACADEMICS & RESEARCH (IJARKE Business & Management Journal) Abstract Management's ability to generate more revenues and initiate dividends is what shareholders and potential investors look into before risking their hard-earned capital for investment purposes in a given company. The study's main objective was to analyze the effect of dividend policy on shareholders' wealth maximization of blue chip firms listed at Nairobi Securities Exchange. The study's specific objective was to assess the effect of Dividend per share on shareholders wealth maximization of blue chip firms listed at Nairobi Securities Exchange. Market Price per Share was used as a proxy for shareholders' wealth maximization. The study utilized a correlational research design. The study targeted the NSE 20 Share Index firms listed at Nairobi Securities Exchange. The purposive sampling technique was used to select the sample size of the five Blue Chip Companies listed at NSE. Descriptive statistics in the form of frequency tables and the mean and standard deviation were used. Inferential data inform of regression, and correlational analysis was used to establish the relationship between study variables. The study's correlation results established a positive and significant relationship between dividend policy and shareholder wealth maximization. The findings revealed that the Dividend per share positively affected shareholder wealth maximization as measured by the share price. The study recommended that corporations adopt dividend policies that are sustainable since adopting a good dividend policy will enable an organization to strike a balance between dividend payment and capital gains to ensure the success of the corporations. Key Words: Dividend Policy, Shareholders Wealth Maximization, Blue Chip Firms, Nairobi Securities Exchange