Impact of Political Risk and Capital Market Development on Dividend Policy: Evidence from Pakistan Stock Exchange

Abstract

Dividend policy decision is a puzzling phenomenon in finance literature. This study intends to examine the considerable factors of dividend policy among the non-financial listed companies in Pakistan. The research study intends to explore the influence of firm and country level determinants on the dividend in Pakistan. To achieve the objective, this study collected 134 Pakistani non-financial firms’ data from 2000 to 2017 using POLS and FE approach. The results found that profitability and corporate tax have influencing and positive effect, while size of the firm and investment opportunities shows significantly adverse influence on dividend policy at firm level factors. Under country level factors, inflation, stock market development, and debt market development have negative impact, however political risk has positive influence on dividend policy. This study is beneficial for the board of directors and management of organizations to establish adequate dividend policy for the organization. It will also be useful for stakeholders of the organization regarding investment decision.