Determinants of dividend payout: An empirical study of pharmaceutical companies of Pakistan stock exchange (PSE)

Abstract

Objective of this research is to determine the impact of profitability, growth opportunities, risk, liquidity, firm size, leverage, taxation and audit type on dividend payout in order to increase understanding of the determinants of dividend payout within Pakistani corporate environment. To meet the objective of this research, five year financial data from 2009-2014 of listed pharmaceutical companies is used and analyzed to determine the impact of selected variables on dividend payout of companies. Correlation analysis and backward multiple linear regression is applied on the data to determine the association between variables and the impact of selected independent variables on dividend payout. Findings reveal that liquidity, growth opportunities & profitability are the key determinants of dividend payout of pharmaceutical companies of PSE. 31.90% variation in dividend payout is caused by these variables. Other independent variables including taxation, risk, firm size, and leverage insignificantly influence dividend payout decisions of pharmaceutical companies of PSE.