THE DETERMINANTS OF DIVIDEND PAYOUT POLICY OF THE CONVENTIONAL BANKS IN PAKISTAN

Abstract

Purpose: The objective ofthe study is to identify the factors that affect dividend payout policy of conventional banks of Pakistan using panel secondary data. Methodology & Design: The sample population for the current study was selected as the top 10 conventional banks of Pakistan on the basis of their market capitalization from the conventional banks listed on PSX, and for analysis while ample period was selected as 2013 to 2017. However, pooled OLS analysis using random-effect, correlation analysis and Hausman test has been employed for data analysis using EViews 9. Findings: The results in the above table showed that profitability has significantly positive impact on dividend yield of conventional banks in Pakistan while natural log of cash flow found statistically insignificant and negatively related with dividend yield. In addition, financial leverage found positively related with dividend yield while investment growth opportunities found significant but negatively related to dividend yield of conventional banks in Pakistan. However, lagged dividend was found statistically insignificant in relation with dividend payout policy of conventional banks in Pakistan. Limitations: Comparatively smaller sample population and period; wherein, consideration to specific sector and region also restrain its generalizability to larger proportion and applicability comprehension. Further, it has included dividend payout policy ofconventional banks. Implications: Managers should be continuously focusing on the company’s investment opportunities. Wide range ofinvestments should be focused on by the managers. The more the company invests, the more its risks would decrease and the opportunities to earn more profit would increase.