Examining the impact of Dividend policy on shareholders wealth: A case of Oil & Gas companies in Pakistan

Abstract

Introduction. The theory of finance teaches that firm value is a function of its expected future cash flows in Oil & Gas industry. The market will increase its assessment of firm value only if the firm s dividends yield. Financial experts are of the view that, dividend pay-outs should not theoretically decrease the riskiness of the firm and will not increase its perceived value. Literature Review: The chapter examines the previously conducted researches on the topic of profitability dividend policy and its effect on shareholders’ value. Approximately 10 to 15 research papers are reviewed and analyzed in order to have a grip on the said topic. Research Methodology: The research is quantitative in nature. This means that the study examines the facts and statistics based on the data collected for the research. Sample size of this research is 12 Oil and Gas companies. Findings: The data collected from the secondary sources are then tested via Regression analysis using descriptive statistics. The chapter also discussed the variables and their co-relation through Pearson Correlation matrix. The results showed that value for Adjusted R-squared is 0.967 that indicated that around 96.7% of variation or predication in the dependent variable is explained or predicted by the independent variables of the model. Conclusion: In conclusion, dividend policy has significant impact on shaieholdeis value. Dividend payout (DPO) is increased by one percent, there will be an increase of 0.460 million rupees in market price per share (MPS) by keeping other variables constant. The results also suggested that if there is an increase of one million rupees in dividend per share (DPS), there will be an increase of 0.461 million rupees in market price per share (MPS) by keeping other variables constant