Abstract
This study analyzes the sector-wise dividend payment behavior of Karachi Stock Exchange (KSE) for the period 2009 through 2013. First, the trend of dividend payment of 5 years with respect to all 32 sectors is assessed through descriptive analysis. Second, the unit root test for panel data and pooled ordinary lest square (POLS) test were used on 15 non-financial sectors. Results show that the earning per share has a positive impact on dividend payment in eight sectors including beverages, travel and leisure, fixed-line telecommunication, food processors, household goods, personal goods, automobiles, and electricity; however, forestry (paper and board) is negatively associated with the dividend payout ratio. In addition, free cash flow has a positive impact on dividend payment in fixed-line telecommunication, and a negative impact on chemical, forestry, construction and material, engineering, beverages, tobacco, travel and leisure, food processor, household goods, pharmaceutical and biotech, and automobiles.
Highlights
In principle, the profits of a business organization may be either distributed in the form of paying dividend to its shareholders or retained in the business
Earnings per share are generally considered to be the single most important variable in determining a share’s price. This happens due to retention of earnings. It happens, when companies are in growing face, and the procedure of residual dividend policy is a very common phenomenon, in which first companies cover their capital expenditure and remaining amount would be paid as dividend
This study investigates the factors that influence dividend payment behavior in Karachi Stock Exchange (KSE) by using annual panel data from the period 2009 to 2013
Summary
The profits of a business organization may be either distributed in the form of paying dividend to its shareholders or retained in the business. The academic and professional literatures have concluded that the dividend payment patterns have been decreasing significantly for more than two decades This is mainly because of the structural composition of different firms in the United States as well as their inability to generate enough profits to be distributed among shareholders. According to Doyle (1994), the companies tend to strengthen their marketing plans (called right-handed organizations) to put major emphasis on customer orientation besides incorporating measures to substantially improve their financial plans (called lefthanded organizations) It is, important to note that firms tend to distribute dividends among shareholders but often in the form of inconsistent or irregular pattern. This dividend payment policy is usually exerted by the companies that observe significant variations in their level of earnings (Fama & French, 2001; Pandey, 2003)
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