Abstract:
Purpose
The aim of this study is to determine that if any relationship exist between dividend payout
ratio and life cycle stage of firms. The ratio of retained earnings to total shareholder’s equity
to find out the life cycle stage of firms. Other variables which effect is used as a measure
dividend payout such as growth rate, firm size, age, retained earnings, debt/equity ratio, return
managerial efficiency are also considered. No evidence of research showing the on earnings,
impact of life cycle stage in Pakistan on chemical firms has been found in Pakistan.
Methodology & Design
The analysis is performed utilizing the panel data for all 32 chemical firms listed on PSX
extracted from the annual publications of SBP. The time period for the selected data is 2006-
2015. Regression analysis is done to determine the relationship.
Findings
The outcome of the research shows no relationship between dividend payout and life cycle
stage of firms. Growth rate, debt/equity ratio and life cycle stage are found to have a negative
relationship with dividend payout whereas firm size, age, retained earnings, return on equity
and managerial efficiency have a positive relationship. The overall model is significant at
significant level of 5 %.
Limitations
The results in this study suggest that market participants, potential investors and financial
analysts should focus more on firm size, retained earnings, return on equity and managerial
efficiency while making decisions related to dividends. This study has shown that life cycle
stage has no impact on dividend payout, however literature implies that life cycle stage is an
important factor and should therefore be considered.
