What Dictates the Dividend-Payout Decision of Corporations? A Case Study of Firms Listed at Karachi Stock Excahnge


  • Mustafa Afeef Islamia College, Peshawar
  • Anjum Ihsan Islamia College, Peshawar
  • Hassan Zada SZABIST, Islamabad
  • Sadia Altaf Iqra National University, Hayatabad, Peshawar


Dividend Payout Policy, Leverage, Liquidity, Profitability, Firm Size, Sales Growth


Dividend decision is one of the very crucial factors that have a bearing on the long-term value of a firm. According to the traditional approach, firms that pay larger dividends happen to have escalated share prices compared to those that pay lower or no dividends. There have been previous studies conducted to explore what factors make a firm pay or ignore paying dividends for a given year. However, no consensus has been achieved so far by the researchers as to what really determines a firm’s dividend payout decision. This study is an attempt to re-examine some of the very major considerations a firm takes into account while deciding about the declaration, or otherwise, of dividends. To serve the purpose, the required financial information was obtained from ‘Financial Statement Analysis’ of Non-financial companies published by the State Bank of Pakistan. Sixty one (61) firms were included in the sample having thorough six year financial data ranging from 2006 to 2011 which led to a total of 366 firm-year observations. Results of the study showed that out of the factors analyzed, Liquidity and Profitability had a significant association with the dividend payout policy of firms in the sample. Hence, it may be concluded that the two mentioned factors are the major determinants of a firm’s dividend policy.

Author Biographies

Mustafa Afeef, Islamia College, Peshawar

Assistant Professor, Department of Management Sciences

Anjum Ihsan, Islamia College, Peshawar

Assistant Professor, Department of Management Sciences

Hassan Zada, SZABIST, Islamabad


Sadia Altaf, Iqra National University, Hayatabad, Peshawar

MS Scholar