Do Payout Policies and Channel Preferences of Banking Industries Shift during the Tranquil Periods? Evidence from Emerging Market

Abstract

This study investigates whether the dividend policy (the decision to distribute funds,and the distribution channel preferences) of the bankingsector of Pakistan isaffectedduring any periods of domesticand globalfinancialcrisis. Using a sample of publically listed commercial banks,betweenthe periods of2002 till 2015, this research document that, unlike other countries, the banks in Pakistan fail toindicate adecline in the level of fundsthat are distributedto the investors. Even though the importance of the other means of distribution has increased over time, a major portion ofthe total payoutis still covered bythecash dividends. Moreover, the results of the multinomial logit model,demonstrate that thepayout policy of the commercial bankslisted on the PSX,is not influencedby the global financial crisis. Furthermore, the analysis reveals that more liquid, profitable,and growthoriented bankshave a higher tendencyto pay dividends,thantheotherbanks that do not fall in this category. The empirical results alsoindicate that the signaling hypothesis is a relevant economic phenomenon. These findings provide insights to different stakeholders in developing the relevant policiesneededto cope up with crisis situations,such as the current ongoing Coronavirus pandemic