Impact of Dividend Policy on Shareholders' Wealth: A Case of Karachi Stock Exchange

Shahid Ali (), Qamar Ishtiaq and Muhammad Naveed
Additional contact information
Shahid Ali: Institute of Management Sciences, Peshawar
Qamar Ishtiaq: Institute of Management Sciences, Peshawar
Muhammad Naveed: Muhammad Ali Jinnah University, Islamabad

Business & Economic Review, 2011, vol. 3, issue 1, 106-121

Abstract: This current study is aimed at investigation of a relationship between two important segments of investor expectations relating to cash dividends' policy and wealth of shareholders. A number of research attempts have still to find an exact relationship. This study relies on a data that is gathered from sixty-eight companies from Karachi Stock Exchange. For some companies the financial year concludes in December while for others in June. The analysis is spread in two categories; in one of the categories 37 firms that close their accounts in June are taken for the period 2003 to 2007 whereas in the second category 31 firms are taken which close their accounts in December. The study period for the second category is from year 2004 to 2007. Ordinary least squares and fixed effect model are used to estimate regression equation by taking stock returns as explained variable and dividend payout ratio as explanatory variables. The results of the analysis show that returns have a negative correlation with dividend policy and firm size and have a positive correlation with return on assets, price-earning ratio and growth of the company for the companies with year ended June. For the companies with year ended December returns are negatively correlated with size of the firm, dividend payout ratio, and return on assets. The analysis reveals that OLS Model is not a good model for estimation of returns, but fixed effects model is a good model that can be used for estimation purposes.

Keywords: Dividends; dividend policy; shareholder wealth (search for similar items in EconPapers)
JEL-codes: G10 G21 G32 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://imsciences.edu.pk/files/journals/vol3_1/Pap ... ividend%20policy.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bec:imsber:v:3:y:2011:i:1:p:106-121

DOI: 10.22547/BER/3.1.7

Access Statistics for this article

More articles in Business & Economic Review from Institute of Management Sciences, Peshawar, Pakistan Institute of Management Sciences 1-A, Sector E-5, Phase VII, Hayatabad, Peshawar- Pakistan. Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Attaullah Shah ().