Abstract
This study empirically investigates to find the relationship of the interest rate, inflation rate, exchange rate, GDP growth rate and the unemployment rate with the dividend payout ratio by using annual time series data started from 2001 to 2017. The macroeconomic variables data was collected from State Bank of Pakistan and the dividend payout ratio data of Textile Sector listed on the Pakistan Stock Exchange was collected from the official website of the companies. For analysis of the data the OLS model was applied of which the multiple regression models were applied. Before applying the OLS model the preliminary test was applied. The result of the OLS model shows that there is a positive relationship between the exchange rate and the unemployment and negative relationship between the interest rate, inflation rate and the GDP growth rate with the dividend payout ratio.
Highlights
The financial policy of a country affects the overall performance of the companies
From the analysis the authors concluded that the macroeconomic variables such as the inflation, interest rate, exchange rate, GDP growth rate and the money supply has no relation with the stock return
This study find the relationship between the macroeconomic variables such as the inflation rate, the interest rate, the exchange rate, unemployment rate and the GDP growth rate on the dividend payout ratio
Summary
The financial policy of a country affects the overall performance of the companies. The microeconomic variables are in the control of the economy and the macroeconomic variables are beyond the control of the economy. The economy depend on the macroeconomic variables and the most important macroeconomic variables are the interest rate, the exchange rate, the inflation rate, the GDP growth rate and the unemployment rate. The dividend payout ratio shows the overall performance of the firms. According to the (Jan, Owais, & Khan, 2014) GDP is used to show the overall performance of the country and it has a negative relationship with financial leverage. The studies found on to find the impact of the interest rate, the inflation rate, the exchange rate and found their relationship with the dividend payout ratio. There is no such study found to find the relationship of the macroeconomic variables such as the interest rate, the inflation rate, the exchange rate, the GDP growth rate and the unemployment rate on the dividend payout ratio. The Textile Sector has 57% revenue in Pakistan of the Total export
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