The impact of dividend policy on firm performance: A case study of the industrial sector

Abstract

A dividend is a part of the profit that is distributed among the shareholders. When there is more profit, it increases the dividends which, in turn, increase the stock price of the firm and vice versa, when there is less profit it decreases the dividend payment and the stock price. In Pakistan the companies have no standard policy, therefore, they are open to decide about the dividend payment. The main objectives of the research are aimed at analyzing and investigating factors which affect firm performance such as dividend policy, capital structure short and long term, firm size and firm growth. In this research, the effect of dividend payment policy on the firm’s future performance of the Karachi stock exchange (KSE) listed companies (specifically cement sector) is analyzed. For this purpose, 5 hypotheses are developed and tested. The analyses are carried out by the econometric model (linear regression). The result shows that dividend policy, capital structure long term and firm size influence the performance of the firm (ROE).