Title: Dividend Yield, Leverage and Equity Market Volatility Among Firms Listed at the Nairobi Securities Exchange
Authors: Justin Orang'i Ombui, Isaac Linus Ochieng, Gordon Opuodho
Volume: 9
Issue: 9
Pages: 104-116
Publication Date: 2025/09/28
Abstract:
This study examines the relationship between dividend yield and equity market volatility among firms listed on the Nairobi Securities Exchange, with leverage considered as a moderating factor. Using a panel regression framework supported by diagnostic tests, the findings reveal that dividend yield significantly influences market volatility. Contrary to traditional theory, higher dividend yields are associated with increased volatility, reflecting the dynamics of emerging markets where elevated yields often signal depressed share prices rather than enhanced payouts. The study also establishes that firm size reduces volatility, while leverage amplifies it but simultaneously moderates the effect of dividend yield. These results highlight the context-dependent nature of dividend yield as a valuation signal in frontier markets. The study provides both theoretical and practical contributions by clarifying the role of dividend yield in market stability and offering guidance for policymakers, managers, and investors on incorporating dividend signals, firm size, and leverage in formulating strategies to mitigate volatility risks.