Factors Influencing Dividend Payout Ratio: Evidence from KSE 100 Index Pakistan

Abstract

This research is an effort to make known the insight dynamics for determination of Dividend Payout regarding Non-Financial Firms listed in the KSE100 Index. In light of prior literature, key explanatory variables were identified to reveal their relationship and effect on determination of dividend payout. These variables are Changes in stock prices, Previous year dividend, Change in current year earnings and Change in sales. Through observation, 42 such companies were identified from the listed non-financial firms in the Karachi Stock Exchange that have been paying out dividend consistently for the past period from 2006 to 2014. Ordinary Least Square (OLS) was identified as the most appropriate tool for econometric analysis of the data. The descriptive statistics revealed the data to be normal. OLS result shows insignificant negative relationship of changes in sales and changes in stock prices with dividend payout ratio. Change in current year earning has significant negative relationship with dividend payout ratio while previous year dividend has significant relationship with dividend payout ratio. Since Dividend is an unsolved puzzle, thus there is implication for future research. Many other variables that have significance in context of Pakistan and past literature can be added to this regression to increase the explanatory power of the model.