DefinePK

Research Objective

To examine the connection between dividend policy and the value of Pakistani companies listed on the Pakistan Stock Exchange.

Methodology

The study employed a quantitative approach using panel data from 70 Pakistani companies between 2014 and 2023. Financial statements were used to construct the data. The dependent variable was firm value (Tobin's Q), and independent variables included the price-earnings ratio (PER), dividend payout ratio (DPOR), and earnings per share (EPS). Control variables were firm growth (FG), leverage (LEV), and firm age (FA). Data analysis methods included descriptive analysis, correlation, and multiple regression.

Methodology Flowchart

                        graph TD
    A["Data Collection: Financial Statements of 70 Pakistani Companies 2014-2023"] --> B["Data Preparation: Construct Panel Data"];
    B --> C["Variable Identification"];
    C --> D["Dependent Variable: Tobin's Q"];
    C --> E["Independent Variables: PER, DPOR, EPS"];
    C --> F["Control Variables: FG, LEV, FA"];
    D --> G["Descriptive Analysis"];
    E --> G;
    F --> G;
    G --> H["Correlation Analysis"];
    H --> I["Multiple Regression Analysis"];
    I --> J["Interpretation of Results"];
    J --> K["Conclusion and Recommendations"];                    

Discussion

The findings suggest that dividend policy is a crucial factor in enhancing the value of firms in emerging economies like Pakistan. The positive correlation between dividend payout ratio, PER, EPS, and Tobin's Q supports the idea that distributing profits to shareholders and strong earnings contribute to a higher market valuation. The study also highlights the importance of firm growth and leverage in influencing firm value, with higher leverage potentially leading to better profitability for firms.

Key Findings

There is a positive link between firm value and dividend policy. Tobin's Q is favorably impacted by the dividend payout ratio, price-earnings ratio, and earnings per share. Firm growth and leverage also positively and significantly impact firm value. Firm age showed an insignificant relation to firm value.

Conclusion

Dividend policies significantly influence the value of companies listed on the Pakistan Stock Exchange. Consistent dividend policies are advised for businesses to boost firm value.

Fact Check

1. Sample Size: The study sampled 70 enterprises. (Confirmed in Abstract and Methodology)
2. Timeframe: The data spans from 2014 to 2023. (Confirmed in Abstract and Methodology)
3. Dependent Variable: Firm value was measured using Tobin's Q. (Confirmed in Abstract and Methodology)

Mind Map