Effects of Banks Specific Factors on Dividend Policy: A Case of Commercial Banks of Pakistan

Abstract

Looking at the dividend situation more attentively makes it seem like a jigsaw puzzle with pieces that don't match. The primary aim of this research is to ascertain the impact of industry-specific variables on the dividend policies of commercial banks that are publicly traded on the Pakistan Stock Exchange. In this context, the dependent variable is dividend policy, as indicated by the dividend payout ratio proxy. The independent variable comprises bank-specific variables, including revenue growth, ownership structure, liquidity, profitability, financial leverage, taxation, and the firm's life cycle. Secondary data spanning the years 2009 to 2019 was meticulously gathered from the annual reports of every bank under consideration. Descriptive statistics (mean, standard deviation, minimum, and maximum value) and inferential statistics techniques (pooled ordinary least squares (OLS) and fixed effect models) are employed to analyze the data. The findings from the fixed effect model indicate that the predictors of ownership structure, liquidity, profitability, leverage, taxation, life cycle, and development account for 84% of the variance in firm dividend policy. These predictors have an effect of 0.84 percent on the dividend policy. The dividend policy is significantly and positively impacted by profitability and financial leverage, based on what the fixed effect model found. Conversely, the life cycle of the company exerts a substantial and adverse influence on dividend payments.