Theoretical advancement and empirical evidence of Dividend policy

Abstract

The objective of the study was to explore relationship between dividend and shareholders value. While talking of dividend it has been observed that there are two schools of thought. One thought advocate that the rise or fall in dividend increases or decreases the value of the company while the other is of the opinion that the dividend and company worth or value has no direct relationship. To test the hypothesis of the study whether Pakistani listed firms support relevance or irrelevance theory of dividend. For this purpose, secondary data was utilized through a sample of 319 firms with paying of dividend any time during 2008-18. The results from chi square and fixed effect model shows that there is significant positive association between dividend pay-out ratio, negative with dividend yield, positive with dividend decision to pay or not pay dividend. Study also check the impact of govt tenure and political affiliation impact on share value with dividends. Study concludes that Pakistani listed firms follow the theories of dividend such Catering, signalling, bird in hand theory, and agency theory of dividend. The current research study intends to minimize the knowledge gap on the referred topic. The present research study has analysed a number of observations in Pakistani context. Researchers have argued on the impact or influence of dividend and the value of the company. They forwarded their justifications on the basis of their varied observations. They have also argued whether dividend can be predicted on the basis of company business. However, there is no unanimous agreement on this issue. While studies on the established markets are available with conclusive opinion, the observations on emerging markets like Pakistan is still under the process of some conclusive opinion.