Factors Affecting Dividend Policy of Commercial Banks in Pakistan (2005-2012)

Abstract

Purpose – The purpose of the paper is to find the factors which affect dividend policy of commercial banks in Pakistan. Design/Methodology/Approach – The paper examines the factors affecting dividend policy of commercial banks in Pakistan using Primary as well as secondary data. The primary data consists of feedback from Board of Directors and the higher management involved in dividend paying decision of Commercial banks while secondary data includes analysis of financial statements of commercial banks in Pakistan. Findings – The paper finds that the dividend policy of commercial banks in Pakistan is influenced by the five major factors which are Prior Dividend, Earnings Growth, Size of the Bank, Poor Management and Market to book value of the share. First three factors affect dividend policy positively and last two affect it negatively. Practical Implications – The practical implication of the paper is that managers should consider the factors also keeping in view the profit maximization of shareholder should control the controllable factors like Non-Performing loans. Originality/value – The paper investigates the factors that affect the dividend policy and also consider the behavioral issue of dividend payments.