Abstract
This empirical study examines the controversial relationship between dividend policy and stock prices on the Pakistan Stock Exchange while considering legal implications. Sample data for 18 listed commercial banks (2012-2019) were collected from financial sources. Panel data analysis and several regression models (random effects, fixed effects, and Hausman test) were used. The study shows that cash dividends and dividend yields have a large impact on stock prices, while variables such as earnings per share, retention rates, and after-tax earnings do not. This result contributes to our understanding of the Pakistan stock market and is relevant to emerging and developing markets. However, there are limitations such as high market prices, dividend volatility, and occasional non-payments leading to the issuance of bonus shares by commercial banks.
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