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Do Individual Investors in Pakistan Prefer Dividends?

Author

Listed:
  • Ahmad, Baseer
  • Ali, Syed Babar

Abstract

The question of why individual investors want dividends is investigated by submitting a structured questionnaire. The respondents indicate that they want dividends partly because the cost of cashing in dividends is lower than the cost of selling shares. Their answers provide strong confirmation for signaling and free cash flow theories. The behavioral finance theory related to stock dividend and cash dividend are also showing positive result. Finally our result indicates that individual investor use dividend as a large part of their consumption and they will not likely sell their stock just because the company fails to pay dividend on some occasion. The dissertation contains six chapters and each chapter is a continuation to the next chapter. Chapter 1 - Introduction gives a brief overview as to what the research is about. Chapter 2 - literature Review gives an extensive amount of background information collected through secondary data. Chapter 3 - Methodology explains what type of study this is and what method was used to collect data and how was it analyzed; what was the population and sample size. Chapter 4 - Analysis and Interpretation explains with the help of tables the data collected in this research and interprets the results as well. Chapter 5 – Frequency tables are provided for viewing the responses of the respondents. Finally Chapter 6 - Conclusions and Recommendations explain the results in more detail and sums up the entire dissertation.

Suggested Citation

  • Ahmad, Baseer & Ali, Syed Babar, 2012. "Do Individual Investors in Pakistan Prefer Dividends?," MPRA Paper 64205, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64205
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    File URL: https://mpra.ub.uni-muenchen.de/64205/2/MPRA_paper_64205.pdf
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    References listed on IDEAS

    as
    1. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    2. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
    3. Michael S. Rozeff, 1982. "Growth, Beta And Agency Costs As Determinants Of Dividend Payout Ratios," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 5(3), pages 249-259, September.
    4. Jensen, Gerald R. & Solberg, Donald P. & Zorn, Thomas S., 1992. "Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(2), pages 247-263, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dividends; Small Investors; Individual Investors;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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