IMPACT OF DIVIDEND POLICY ON SHAREHOLDER WEALTH IN PAKISTAN (EVIDENCE TEXTILE INDUSTRY PERSPECTIVE)

Wajid Alim; Arshad Ali; Mohammad Imran Qureshi

Wajid Alim Department of Management Studies, University of Malakand
Arshad Ali Department of Management Studies, University of Malakand
Mohammad Imran Qureshi Department of Commerce ,Gomal University Dera Ismail Khan

Keywords: Market price per share (MPS), Dividend per share (DPS), Dividend payout (DPO), Price earning (PE), Earning per share (EPS).

Abstract

This study examines the impact of dividend policy on shareholder wealth in the textile sector of Pakistan during the period of 2001 to 2010. The study intends to provide thorough information to the investors in the textile sector of Pakistan. A sample of fifty textile listed companies was selected from Karachi Stock Exchange and statistical tools like mean, standard deviation and multiple regression models were used by taking market price per share as dependent variable whereas dividend per share, dividend payout, earning per share, price earning, lagged value of market price and lagged value of price earning were used as independent variables. Market price per share is considered as proxy for shareholder wealth. The results shows that all the independent variables used in the study have a direct relation with the market price per share. Earnings per share, price earning, lagged value of price earning and lagged market value have highly significant impact on market price per share, whereas dividend per share and dividend payout have a significant impact at five percent on market price per share. The findings also reveal that dividend policy of the firm has positive impact on stock price of the firm. Therefore it is concluded that dividend policy has significant impact on shareholder wealth in the textile sector of Pakistan. The paper provides sound practical implications for professionals regarding dividend policies and attracts investors towards growing and attractive investment.