Monetary policy restriction and dividend behavior of Pakistani firms: an empirical analysis
Studies upon impact of macro variables on firm’s dividend policy are very limited and specifically rare in Pakistan perspective. Main purpose of this research paper is to observe impact of restricted monetary policy on dividend behavior of Pakistani firms. During restricted monetary policy, cost of external funds increases and firms prefer to utilize internal funds leading to reduction in dividend payout. Behaviour of 100 listed firms, selected purposefully, has been observed for the period from 2001 to 2009 by using Lintner’ modified model.. During the research period of nine years, monetary policy has been gone through both loose and tight phases. Proposed model is dynamic one as lagged dependent variable has been used as explanatory variable. Due to certain limitations with selection of monetary policy instrument, overall stance of State Bank of Pakistan (SBP) in its annual reports has been used as a dummy variable in the model. Results of all the three estimations reveal almost same results. First lagged dividend has been proved to be most deterministic factor of dividend policy followed by current earnings. Monetary policy and lagged dividends interactive variables provide mixed results. First interactive variable has negative coefficients in all three, fixed effect, random effects and GMM, models but with insignificant p values. Second monetary policy interactive variable has positive coefficients with significant values in random effects and GMM model. Firms seem to follow relatively stable dividend policies with lower adjustment factor. As model is dynamic, GMM estimation is preferred. Monetary policy has not been observed as significant determinant of dividend policy of Pakistani firms.
|Date of creation:||Aug 2011|
|Date of revision:||Oct 2011|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- I.M. Ramesh Bhat, 2007.
"Dividend behaviour of Indian companies under monetary policy restrictions,"
Emerald Group Publishing, vol. 33(1), pages 14-25, January.
- Bhat Ramesh & Pandey I M, 2004. "Dividend Behaviour of Indian Companies Under Monetary Policy Restrictions," IIMA Working Papers WP2004-05-07, Indian Institute of Management Ahmedabad, Research and Publication Department.
- Garrett, Ian & Priestley, Richard, 2000. "Dividend Behaviour and Dividend Signaling," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(02), pages 173-189, June.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 2000.
"Agency Problems and Dividend Policies around the World,"
Journal of Finance,
American Finance Association, vol. 55(1), pages 1-33, February.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Agency Problems and Dividend Policies Around the World," Harvard Institute of Economic Research Working Papers 1839, Harvard - Institute of Economic Research.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert Vishny, 1998. "Agency Problems and Dividend Policies Around the World," NBER Working Papers 6594, National Bureau of Economic Research, Inc.
- Nalinaksha Bhattacharyya, 2008. "Dividend payout and executive compensation: theory and Canadian evidence," Managerial Finance, Emerald Group Publishing, vol. 34(8), pages 585-601, July.
- Malcolm Baker & Jeffrey Wurgler, 2004.
"A Catering Theory of Dividends,"
Journal of Finance,
American Finance Association, vol. 59(3), pages 1125-1165, June.
- Malcolm Baker & Jeffrey Wurgler, 2003. "A Catering Theory of Dividends," NBER Working Papers 9542, National Bureau of Economic Research, Inc.
- Doron Nissim, 2001. "Dividend Changes and Future Profitability," Journal of Finance, American Finance Association, vol. 56(6), pages 2111-2133, December.
- John Goddard & David G. McMillan & John O.S. Wilson, 2006. "Dividend smoothing vs dividend signalling: evidence from UK firms," Managerial Finance, Emerald Group Publishing, vol. 32(6), pages 493-504.
- Rashid Ameer, 2008. "Product market competition, regulation and dividend payout policy of Malaysian banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 16(4), pages 318-334, November.
- Ameer, Rashid, 2007. "Product Market Competition, Regulation and Dividend Payout Policy of Malaysian Banks," MPRA Paper 8579, University Library of Munich, Germany.
- Ahmed, Hafeez & Javid, Attiya Yasmin, 2008. "Dynamics and determinants of dividend policy in Pakistan (evidence from Karachi stock exchange non-financial listed firms)," MPRA Paper 37342, University Library of Munich, Germany.
- N. Bhattacharyya, 2007. "Dividend policy: a review," Managerial Finance, Emerald Group Publishing, vol. 33(1), pages 4-13, January.
- Varouj Aivazian & Laurence Booth & Sean Cleary, 2003. "Do Emerging Market Firms Follow Different Dividend Policies From U.S. Firms?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(3), pages 371-387.
- Omneya Abdelsalam, 2008. "Board composition, ownership structure and dividend policies in an emerging market: Further evidence from CASE 50," Managerial Finance, Emerald Group Publishing, vol. 34(12), pages 953-964, October.
- Khaled Hussainey, 2009. "Disclosure and dividend signalling when sustained earnings growth declines," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(5), pages 445-454, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:34052. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.