EMPIRICAL ANALYSIS OF FINANCIAL FACTORS INFLUENCING DIVIDEND DECISIONS: EVIDENCE FROM THE CHEMICAL INDUSTRY IN PAKISTAN

Abstract

This study aims to empirically investigate the key financial factors that influence the dividend payout decisions of firms within the chemical industry of Pakistan. Specifically, it examines the impact of profitability, cash flow, sales growth, debt to equity, and corporate tax on dividend policy. The study employs a quantitative approach, utilizing panel data for a sample of 20 firms listed in the chemical sector of the Pakistan Stock Exchange over a five-year period from 2007 to 2011. Data was collected from the State Bank of Pakistan. A panel regression model was used to analyze the relationship between the dependent variable (dividend payout) and the selected independent variables. The regression analysis reveals that profitability has a statistically significant and positive relationship with the dividend payout, indicating that more profitable firms tend to distribute higher dividends. Conversely, cash flow was found to have a significant negative relationship with dividend payout. The results for sales growth, corporate tax, and debt to equity were statistically insignificant in explaining the variance in dividend payout policies for the sampled firms.

Key Words: Dividend Policy, Dividend Payout, Corporate Finance, Chemical Industry.