COMPARATIVE DETERMINANTS OF FIRM VALUE IN SHARIAH-COMPLIANT AND NON-COMPLIANT FIRMS: EVIDENCE FROM PAKISTAN

Abstract

This study examines the effect of dividend policy on firm performance in Pakistan. It compares Shariah-compliant (SC) and non-compliant (NC) non-financial listed firms. The study uses panel data from 2012 to 2022. Firm performance is measured through return on assets, return on equity, and earnings per share. Dividend policy is measured through dividend payout, dividend per share, and price earnings ratio. Control variables include firm size and debt-to-equity ratio. Random and Fixed Effects models were applied after running diagnostic tests. Results show that for SC firms, return on assets, return on equity, size, and dividend payout improve performance, while debt-to-equity reduces it. For NC firms, earnings per share, return on assets, dividend payout, price earnings, and debt-to-equity improve performance. Dividend per share has no significant effect in both groups. The study suggests that dividend policy has different effects depending on Shariah status. Policymakers should promote dividend strategies that enhance performance and encourage sustainable growth. Investors can use these findings to make better portfolio decisions. Future research can extend this study by including financial firms, other markets, or additional variables like corporate governance and ownership structure.

Keywords: Dividend Policy, Firm Performance, Shariah-Compliant Firms, Non-Compliant Firms, Panel Data, Pakistan, Corporate Finance