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Modeling Dividend Behavior in Pakistan

  • Haleem, Fazli
  • Javid, Attiya Yasmin

This study examines the determinants of dividend policy by Lintner (1956) and Braittan (1966) and their extended versions to examine their relative significance in the Pakistani context. The sample consists of thirty-five firms in the overall manufacturing sector and three sub-sectors: textile, energy and chemicals the period 2007 to 2009. The analysis reveals that Lintner model is better than other models examined in the study and net profit and lag dividends are important determinants of dividend policy in Pakistani manufacturing sector. The depreciation and liquidity has significant impact on the dividend policy when included in the Lintner model while investment demand, interest rate, share price behavior and debt turn out to be insignificant. The results imply that for dividend decisions, past dividends, profits and depreciation matters and Lintner model fits the data well in case of manufacturing sector of Pakistan.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37564.

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Date of creation: 2011
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Publication status: Published in Information Management and Business Review 6.3(2011): pp. 289-301
Handle: RePEc:pra:mprapa:37564
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  16. Smith, Clifford Jr., 1977. "Alternative methods for raising capital : Rights versus underwritten offerings," Journal of Financial Economics, Elsevier, vol. 5(3), pages 273-307, December.
  17. Chinmoy Ghosh & J. Randall Woolridge, 1988. "An Analysis Of Shareholder Reaction To Dividend Cuts And Omissions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 11(4), pages 281-294, December.
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  22. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
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