Dividend Policy and Firm Performance with Moderating Effect of Ownership Structure: Evidence from The Manufacturing Firms in Pakistan

Abstract

The objective of this paper is to check the impact of dividend policy and firm performance with a moderating effect of ownership structure. Many studies have been made to check the impact of dividend policy on firm performance but there is not a single study that has been made yet to check the impact of dividend policy and firm performance with moderating effect of ownership structure. This research had been carried out on different non-financial sectors of Pakistan covering the firms of automobile assembler and parts manufacturing, cement and chemical manufacturing, fertilizer manufacturing, pharmaceuticals, and textile manufacturing etc. The data used in carrying out this research was taken from the companies that was paying dividends and were listen in KSE-100 index of Pakistan Stock Exchange. Ownership data of the firms were collected by the company’s pattern of shareholding which are published or mentioned in the company’s annual report as per Securities and Exchange Commission of Pakistan (SECP) requirements that can be taken from the company’s website. The study shows significant positive relationship between dividend policy and firm performance. The study also shows that there is positive significant relationship between dividend policy and firm performance with moderating effect of ownership structure. Dividend policy can also have implications for a company's investment and growth prospects. In general, firms that retain more of their earnings for reinvestment are likely to have higher levels of capital expenditures and research and development spending. However, dividend payments can also signal to investors that a company has confidence in its future growth prospects.