Impact of Profitability, Firm Size and Leverage on Dividend Policy: Evidence from Pakistani Listed Firm Rameen

Abstract

Dividend policy is a key tool for companies to increase shareholder wealth, according to researchers and politicians in both developed and developing countries. Listed companies in Pakistan are the focus of this study, which seeks to analyze their dividend policies, business size, leverage, and the effect of profitability factors. To do this, it draws on the vast body of literature on the topic of industrial munificence and its moderating effects. Companies listed on the Pakistan Stock Exchange between 2009 and 2023 were the subjects of the study, which used a quantitative research approach. A variety of static and dynamic models were used to analyze the collected data, including Pooled Ordinary Least Squares and Fixed Effect analysis. Interestingly, company size, profitability, and leverage all have an effect on payout policy. However, these relationships were mitigated by the industry's generosity. Firm size and ownership structure had a stronger beneficial effect on dividend policies of companies with high industry munificence compared to companies with low industry munificence. Overall, these findings provide a new framework that investors and participants in the stock market may utilize to make more informed decisions. In addition to increasing shareholder value, an efficient and effective dividend policy will help board members understand which elements related to company size and ownership structure are most important when formulating and carrying out dividend policies.