Abstract:

Dividend payout policy is the most controversial topic within the context of corporate finance. According to Brealy et.al, (2008) dividend policy controversy is one of the ten major unsolved problems of corporate finance which deserves more research in order to increase understanding of the subject. A number of researches are conducted in this area globally however there is no general consensus is found among them. Among researches conducted in this area MM model is generally known theory which states that in an ideal capital market dividend policy of a firm is irrelevant. A number of researchers found that various real world factor influence company’s dividend payout policy (Mehta, 2012, Nuhu, 2014, Maladjian & Khoury, 2014, Rafique, 2012, Gill, Biger & Tibrewala, 2010), it is therefore worthwhile for stakeholders of a company to understand factors that influence company’s dividend payout decisions. Objective of this research is to determine the impact of selected variables 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 the companies. The independent variables include profitability, growth opportunities, risk, liquidity, firm size, leverage, taxation and audit type and dependent variable is dividend payout. Correlation analysis is applied on data to determine the association between dependent and independent variables. Backward multiple linear regression is applied to determine 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 are insignificant in influencing dividend payout decisions of pharmaceutical companies of PSE.