The Impact of Dividend Policy on Shareholders Wealth

Abstract

The present paper is aimed at analyzing the impact of dividend policy of shareholders’ wealth in Textile sector of Pakistan during 2004 to onwards. To measure the impact of dividend policy on shareholders’ wealth multiple regression method and stepwise regression models will be used by taking (Dividend per Share), RE it (Retained Earnings per Share), Pet-1 (Lagged Price Earning Ratio) and MPSit-1 (Lagged Market Price) (MVit-1) as independent variable, and MPSit (Market Price per Share) as dependent variables. To determine the proportion of explained variation in the dependent variable, the co-efficient of determination (R2) will be tested with the help of F value. The previous study done in this field study proved that the wealth of the shareholders is greatly influenced mainly by five variables viz., Growth in sales, Improvement of Profit Margin, Capital Investment Decisions (both working capital and fixed capital), Capital Structure Decisions, Cost of Capital (Dividend on Equity, Interest on Debt) etc. The previous study was done on organic and inorganic chemical industries of India. The author found a significant impact of dividend policy on shareholders’ wealth in Organic Chemical Companies while the shareholders’ wealth is not influenced by dividend payout as far as Inorganic Chemical Companies are concerned. This study aims to apply the previous research on textile sector of Pakistan.