Abstract:
Purpose - This study is conducted to examine the impact of dividend on share price of
Pharmaceutical sector companies listed at Karachi Stock Exchange (KSE).
Design/metliodology/approach - In this study, a sample of 7 Pharmaceutical firms listed at
KSE were selected. Data is extracted from their respective annual reports from the period
2009-2013. In order to measure dividend, three main ratios used which are Dividend per
share (DPS), Dividend yield (DY) and Dividend payout (DPO) while market price is used as
dependent variable. Descriptive statistics, Correlation analysis and regression models are
used to examine the impact between dividend and share price after controlling factors such
as Debt, Size, Earning per share and Return on equity.
Findings - The paper find that dividend had an impact on share price as 49.4% variation in
market price is explained by the model. A positive relationship is found between Dividend
per share and market price and a negative relationship between Dividend payout and market
price. It was found that Dividend yield has no significant impact on price while Return on
equity and price are negatively significant to each other.
Practical implications - The outcomes of this study will help the pharmaceutical companies’
financial managers to understand the importance of distributing right amount of dividend and hence
improve their share price. Moreover, investors also find the results of this study as a useful
source in their investment decisions either to invest in a company which pays higher
dividend or retaining more.
