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Impact of dividend policy on shareholders wealth and firm performance in Pakistan

Author

Listed:
  • Khadija Farrukh
  • Sadia Irshad
  • Maria Shams Khakwani
  • Sadia Ishaque
  • Nabeel Younus Ansari

Abstract

In the field of corporate finance the question as to whether dividend policy affects the shareholders wealth still remains unresolved. The objective of this research paper is to establish the impact of dividend policy on shareholders’ wealth and firm performance in Pakistan. The conduct of dividend policy has been one of the most debatable issues in literature of corporate finance. Numerous researchers have attempted to reveal issues with respect to the dividend policy, however, we still don’t have a worthy explanation regarding the behavior of dividend policy. The variables used in this research are dividend policy, shareholders wealth, and firm performance. Dividend per share and dividend yield are used to measure dividend policy. For shareholders wealth, earning per share and share price are used as proxies. Return on equity is used to measure firm performance. From the regression result, it is found out that dividend policy has positively significant impact on shareholders’ wealth and firm performance. This study supported dividend relevance theory, signaling effect theory, bird in hand theory and clientele-effect theory. The study commends the implementation of stable, effective, managed and target-oriented dividend policy by firm’s financial managers along with effective supervisory framework governed by capital market regulatory bodies to uplift firms’ performance and shareholders wealth in Pakistan. Furthermore, appropriate firm disclosure with respect to dividend payout and dividend per share is needed to guard the potential investors in making the right investment choices in listed firms.

Suggested Citation

  • Khadija Farrukh & Sadia Irshad & Maria Shams Khakwani & Sadia Ishaque & Nabeel Younus Ansari, 2017. "Impact of dividend policy on shareholders wealth and firm performance in Pakistan," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1408208-140, January.
    • Handle: RePEc:taf:oabmxx:v:4:y:2017:i:1:p:1408208
    DOI: 10.1080/23311975.2017.1408208
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    References listed on IDEAS

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    Cited by:

    1. Purwani Tri, 2019. "ABID concept in the effect of financial policy on firm value," HOLISTICA – Journal of Business and Public Administration, Sciendo, vol. 10(2), pages 51-68, August.
    2. Jihai Lu & Sohail Ahmad Javeed & Rashid Latief & Tao Jiang & Tze San Ong, 2021. "The Moderating Role of Corporate Social Responsibility in the Association of Internal Corporate Governance and Profitability; Evidence from Pakistan," IJERPH, MDPI, vol. 18(11), pages 1-22, May.
    3. Richard Arhinful & Leviticus Mensah & Halkawt Ismail Mohammed Amin & Hayford Asare Obeng, 2024. "The influence of cost of debt, cost of equity and weighted average cost of capital on dividend policy decision: evidence from non-financial companies listed on the Frankfurt Stock Exchange," Future Business Journal, Springer, vol. 10(1), pages 1-24, December.
    4. Liliana Nicoleta Simionescu & Ştefan Cristian Gherghina & Hiba Tawil & Ziad Sheikha, 2021. "Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-45, December.
    5. Krishnamoorthy Charith & Andrey Davydenko, 2021. "Informational Value of Dividend Initiations: Impact of Cash Dividends on Share Prices of Manufacturing Companies in Sri Lanka," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(3), pages 1-13, March.
    6. Charith, Krishnamoorthy & Davydenko, Andrey, 2021. "Informational Value of Dividend Initiations: Impact of Cash Dividends on Share Prices of Manufacturing Companies in Sri Lanka," SocArXiv jqnt4, Center for Open Science.
    7. Andrey Davydenko & Krishnamoorthy Charith, 2021. "Informationswert von Dividendenausschüttungen: Einfluss von Bardividenden auf die Aktienkurse von produzierenden Unternehmen in Sri Lanka [Informational value of dividend initiations: Impact of cas," Post-Print hal-03359177, HAL.
    8. Novi Swandari Budiarso, 2019. "Agent, Steward, and Dividend Policy," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 83-94.

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