Dividend Paying Practices in the Non-Financial Sector of Pakistan: An Empirical Evidence from Karachi Stock Exchange

Abstract

The study intends to investigate the dividend paying practices in the non-financial sectors of the Karachi Stock Exchange. All the dividend paying sectors of the Karachi Stock Exchange were probed into for the period 2002- 2008. A well developed mixture of six variables along with the descriptive statistics were made the use of to scrutinize the dividend paying behavior of sectors. Inconsistency, reluctance and trivial average rate from 1.5% to 5% of the dividends were being paid by the sectors. The profitability was not functioning adequately regarding the dividends and the highly profitable sectors were also in the habit paying nominally. Most of the funds were noticed to be used for financing the growth opportunities and only the mature and highly profitable sectors were keeping pace with the growth opportunities and endeavoring to transform it to the shareholders. The market capitalization was observed to oppose the trend of the dividends in almost all the sectors but the lick of it varied with the rate of surge in the market capitalization numbers. All the sectors were having a trend to disburse and dwindle the rate of the dividend at the very beginning, middle and at last to make a drift in it during the last couple of years, particularly in 2008. The corporate governance should be strengthened in order to protect the rights of the individual shareholders.

Keywords: Dividend Policy, Determinants and Paying Behavior.