The Determinants Of A Firms Dividend Policy Finance Essay

Corporate dividend policy was one of the most debated subjects in corporate finance. Many research workers had devised theories and provided empirical grounds sing the determiners of a house ‘s dividend policy. The dividend policy issued, nevertheless, remain still unresolved as due to the fact that there were so many variables depending upon the type of company, its fiscal conditions, its industry etc that no individual expression could be applicable. Clear guidelines for an ‘optimal payout policy ‘ had non yet emerged despite the voluminous literature. Still there was an acceptable account for dividend behaviour of companies.

During the last 50 old ages several theoretical and empirical studied had been done taking to chiefly three results:

1. The addition in dividend payout affects the market value of the house.

2. The lessening dividend payout adversely affects the market value of the house.

3. The dividend policy of the house does non impact the house value at all.

However, it could be said that empirical grounds on the determiners of dividend policy was unluckily really complex. Footing on which corporations pay out dividends to the portion holders were still an unsolved mystifier. First outstanding survey that appeared in the literature of finance sing dividend policy was that of Miller and Modigliani ( 1961 ) where they stated that there was no misrepresentation in a perfect and a rational economic environment. This was the starting point for other research workers to research dividend payout policy phenomena. Almost all researches that followed referred back to Miller and Modigliani ( 1961 ) .

Assorted researches were carried out by many research workers to research the determiners of dividend payout policy, some of them focused on profitableness, some on size of the houses, some on growing rate of the house while others on bureau costs. For illustration researches carried out by Nissim and Ziv ( 2001 ) , Brook, Yaron Charlton and Hendershot ( 1998 ) , Bernheim and Wantz ( 1995 ) , Kao and Wu ( 1994 ) , and Healy and Palapu ( 1988 ) found out a positive association between increased in dividend payout and profitableness.

Kalay and Lowenstein ( 1986 ) and Asquith and Mullins Kalay ( 1983 ) found out that dividend alterations was positively associated with stock returns. Sasson and Kalody ( 1976 ) concluded that the payout ratio was positively associated with mean rates of return. Surveies of Benartzi, Michaely, and Thaler ( 1997 ) and DeAngelo, DeAngelo, and Skinner ( 1996 ) found no support for the relationship between future profitableness and dividend alterations.

On the other side most debated factor impacting dividend policy arguably was bureau costs Jensen ( 1986 ) . Agency cost statement suggests that cost had reduced by dividend payments and hard currency flow Rozeff ( 1982 ) . Researches carried out by Jensen, Solberg, and Zorn ( 1992 ) , and Lang and Litzenberger ( 1989 ) supported this bureau cost hypothesis, while others such as Lie ( 2000 ) , Yoon and Starks, ( 1995 ) and Denis, Denis, and Sarin, ( 1994 ) found no support for this hypothesis.

Size of the house was another factor which seemed to hold an impact of dividend payout policy. Firms larger in size were considered to hold more ability to payout dividends to their portion holders. Lloyd, Jahera, and Page ( 1985 ) , and Vogt ( 1994 ) pointed that house size played a function in clear uping the dividend-payout ratio of houses. They argued that because larger houses were mature and had easy entree to capital markets therefore they did non truly depended much on internally generated support which enabled them to payout higher dividends.

The intent of this research was to look into the kineticss and determiners of dividend policy of oil & A ; gas sector houses in Pakistan. The independent variables were: size, profitableness and growing. Analysis of these variables revealed the being of an impact of these variables on dividend payout policy of the houses and really nature of the relationship.

The staying portion of this thesis is patterned as under.

Section 2: Short critical rating of theories about the dividend has been presented.

Section 3: The factual information and possible variables that could work as proxy for finding of assorted influences for analysis have been discussed.

Section 4: Provided inside informations of methodological analysis used.

Section 5: Thesis established analysis and readings.

Section 6: Mentioned consequences and drew a decision.

Chapter 2:

LITERATURE REVIEW

There are assorted theories which provide penetration on how a house pays the dividends.

2.1 Miller and Modigliani Theory

Harmonizing to Miller and Modigliani ( of Merton Miller, Franco ) ( 1961 ) dividend did non affect houses ‘ value in perfect market. Stockholders where non concerned about having their hard currency flows as dividend or in form of capital addition, every bit far as houses did non alter the investing policies. In this type of state of affairs houses ‘ dividend payout ratio affected their residuary free hard currency flows, when the free hard currency flow was positive the houses decided to pay dividend and if negative they decided to publish portions. They besides concluded that alteration in dividend could be conveying the information to the market about their future net incomes.

Examples:

It ‘s a common belief that dividend policy is created by stockholder himself for illustration if a individual has 10,000 PKR and wants income of 3,000 PKR a twelvemonth from that portfolio, merely 3000 PKR money value can be sold by a individual because this sum as dividend income is non desired by him. This theory says, “ Who is dying about dividends? ”

M & A ; M explain that under certain premises including rational investors and a perfect capital market, the value of a house is non dependent on its dividend policy.

Smirlock & A ; Marshall, ( 1983 ) stated that relationship between the Dividend and Investment Decisions indicates deficiency of causality between the dividend and investing determinations of the house. The fact that the firm-specific informations once and for all supported the separation rule is peculiarly convincing. This is the first application of causality trials to a big sample of houses.

2.2 The Bird in the Hand Theory

Investors ever preferable hard currency in manus instead than a future promise of capital addition due to minimising hazard Gordon ( 1963 ) .

Gordon believed that he was dying about puting in dividends and dividend stocks. Gordon said that when he was paid hard hard currency by the company, he knew that the company was non merely stating him that it was doing money but the fact was that it was truly doing money. This was the thought that hard currency payment was valued by the investors in the hope of future net incomes.

2.3 The Agency Theory

Traditionally, corporate dividend policy has been examined under the premises that the house is one homogeneous unit and that the direction ‘s aim is to maximise its value as a whole. The bureau cost attack differs from the traditional attack chiefly in this manner that it explicitly recognizes the house as a aggregation of groups of persons with conflicting involvements and self-serving motivations. Harmonizing to the bureau theory, these behavioural deductions cause persons to maximise their ain public-service corporation alternatively of maximising the house ‘s wealth.

The bureau theory of Jensen and Meckling ( 1976 ) is based on the struggle between directors and stockholder and the per centum of equity controlled by patron ownership should act upon the dividend policy. The theory focuses on the relationship between an agent of the principal ( company ‘s directors ) and a principal ( stockholder ) .

Harmonizing to Jensen and Meckling ( 1976 ) in corporations, bureau job arises due to external debt and external equity. Jensen and Meckling ( 1976 ) analyzed that how steadfast value is affected by the distribution of ownership between inside stockholders and outside stockholders who can devour fringe benefits, while some can non. Within this model, increased managerial ownership of equity alleviates bureau troubles by cut downing inducements to devour fringe benefits and expropriate stockholder wealth. Jensen and Meckling ( 1976 ) argue that equity bureau costs would be lower in houses with larger proportions of inside ownership. Directors have better understanding with their shareholders when they increase the stockholders ‘ ownership of the house.

Dividends play an of import function to cut down struggles between shareholders and directors. Any dividend policy should be designed to minimise the amount of capital, bureau and revenue enhancement costs.

Harmonizing to Bathala ( 1990 ) , in the bureau costs and dividends, two lines of idea can be found explicating cross-sectional fluctuations in payout ratios.

First position

Clasps that a house ‘s optimum payout ratio is the consequences of a tradeoff between a decrease in the bureau costs of external equity and an addition in the dealing costs related with external funding, ensuing from dividend payments as the payout ratio additions.

Second position

Argues that inside ownership and external debt are utility mechanisms in mitigate bureau costs in a house. Basic survey for the first line of idea is based on Rozeff ‘s ( 1982 ) propositions. He suggests that dividend payout ratios may be explained by decreased bureau costs when the house increases its dividend payout and by increased expensive external capital.

Easterbrook ( 1984 ) gives farther account sing bureau cost job and says that there are two signifiers of bureau costs ; one is the cost monitoring and other is cost of hazard antipathy on the portion of managers or directors. The bureau theory is related with deciding two issues that can be held in an bureau relationship.

Problems

The desire of the principal and agent struggle and it is expensive or complicated for the principal that it can non look into that the agent has behaved suitably.

Hazard sharing is a job that occurs when the agent and rule have different behaviour towards jeopardy. The issue here is that the principal and the agent may prefer separate actions because of the separate hazard penchants.

Harmonizing to ( Naceur, Goaied, & A ; Belanes, 2006 ) profitable houses with more stable net incomes can pay larger dividend. Whenever they are turning really speedy, dividend policy does n’t acquire any impact from fiscal purchase and ownership concentration. Besides the dividend payment is being impacted negatively by the liquidness of stock market and

size.

Oskar kowalewski and Ivan Stetsyukand Olesksandr Talavera ( 2007 ) survey that how corporate administration determines dividend constabularies in Poland. They have recognized for the first clip, quantitative steps on the quality of corporate administration for non- fiscal companies. Their consequence recommended that large and excess profitable companies have high dividend payout. In add-on, insecure and excess indebted houses favor to pay lower dividend s. The consequences eventually, based on the period of 1998-2004, Reveals that dividend policy is rather of import in the rating procedure of companies, but the issues still remain barely investigated in passage states. A survey on the deciding s of dividend policy and its association to corporate administration in a passage economic system both offers an interesting topic and complements the bing corporate administration literature.

The bureau theory points that dividend may extenuate bureau costs by administering free hard currency flows that would otherwise be spent on unprofitable undertakings by the direction. It is argued that dividends expose houses to more frequent analysis by the capital markets as dividend payout increases the likeliness that a house has to publish new common stock. On the other manus examination by the market helps relieve timeserving direction behaviour and bureau costs. Agency cost in bend is related to the strength of stockholders rights and they are associated with corporate administration. Furthermore, bureau suggested that stockholders may prefer dividends peculiarly when they fear expropriation by insider. They test the determiners of dividend policy in a multiple arrested development model to command house ‘s specific features other than administration. All the variables enter the arrested developments with expected marks. Size and return on assets are positively associated with variable hard currency dividend while purchase is negatively associated with variable hard currency dividend. Their consequences supply grounds that in Poland, listed companies where corporate administration patterns are high and as a consequence stockholders ‘ rights are for strong payout of higher dividends.

Jianguo Chen and Nont Dhiensiri ( 2009 ) reference the relationship between dividend pay-out ratio ( POR ) with the pro Cash flow variableness ( CFV ) , ownership scattering, insider ownership, free hard currency flow, indirect stable assets, Past growing ( GROW1 ) , future growing ( GROW2 ) , stable dividend policy and imputation recognition ( IMP ) . They analyze the determiners of the corporate dividend policy utilizing houses listed on New Zealand Stock Exchange. They examined that houses traditionally have high dividend payouts compared with companies in the US. They find that there is a negative relationship between dividend payout ratio and CFV, Insider, Beta, growing and positive relationship between ownership scattering, free hard currency flow, indirect stable assets, stable dividend policy and imputation recognition. Their decision provides strong support to the bureau cost theory and partly supports dealing cost and residuary dividend theory. They do non hold any grounds to back up the dividend stableness and the signaling theories.

2.4 Signing Theory

The account about the signaling theory given by Bhattacharya ( 1979 ) and John, Kose and Williams ( 1985 ) dividends allay symmetric information between directors and stockholders by presenting inside information of house hereafter chances.

A houses ‘ proclamation of publishing in common is a signal that the houses ‘ position are non clear, more over a signal that the houses ‘ stock monetary value might merely turn down.

For illustration:

If a house position would be clear, which means its stock monetary value would increase ; in such instance the house would non wish to sell stock monetary value for avoiding the portion the turning net incomes with other new stock holders. It could utilize debt to increase money. In the conflicting, if a house position would be bad, its stock monetary value will likely fall, the house in such instance would desire to sell new stock for sharing future also-rans with other new stock holder.

2.5 Effect of Tax Preferences Theory

Miller and Scholars ( 1978 ) find that the consequence of revenue enhancement penchants on patronages and reason different revenue enhancement rates on capital addition and revenue enhancement rates on dividend taking to different patronages.

“ Tax Preference theory ”

Investors gave an of import consideration to the revenue enhancements. This should be kept in head that the dividends are taxed at a upper rate than the capital additions. As such, capital additions are preferred by the investors as compared to the dividends. This is known when the investings are really sold merely so the capital additions are paid. When capital additions are realized as opposite so it is governable, otherwise dividend payments are unmanageable by them and the related companies control the dividend payment. In an estate state of affairs, capital additions are non realized.

For illustration:

If a stock is purchased by an investor 50 old ages ago and is held by him until his or her decease it is so passed on to an inheritor after decease. Now that inheritor does non hold to pay revenue enhancements on stock ‘s grasp.

2.6 Life Cycle Theory

Life Cycle Theory and Fama and French ( 2001 ) province that the houses should follow a life rhythm and reflect direction ‘s appraisal of the importance of market imperfectness and factors including revenue enhancements to equity holders, bureau cost asymmetric information, drifting cost and dealing costs.

2.7 Catering Theory

Baker and Wurgler ( 2004 ) in Catering theory suggest that the directors in order to give inducements to the investors harmonizing to their demands and wants. In this manner cater the investors by paying smooth dividends.When the investors are non paid so they prefer non remunerators to set stock monetary value premium on them.

2.8 Lintner ‘s Model

John Lintner ( 1956 ) initiates with his theory relies on two of import things that he studied about dividend policy:

Harmonizing to the sum of positive net-present-value ( NPV ) plan the companies be probably to put long-term aim dividends-to-earning ratios.

Net incomes additions are non ever endurable. As a consequence, until directors can see that new earning degrees are endurable so dividend policy is non changed.

As respects the empirical literature the roots of the literature on determiners of dividend Policy is related to Lintner ( 1956 ) seminal work after this work during the period of 1996-2002 this work theoretical account was extended by The Samy Ben Naceur, Mohamed Goaied and Amel Belanesthe ( 2006 ) on the Tunisian Stock Exchange. Lintner ‘s theoretical account is applied utilizing inactive and dynamic panel informations arrested developments. They examined that Tunisian houses rely more on current net incomes that past dividends to repair their dividend payments in the manner that the current net incomes are more sensitive to the dividend than the anterior dividend and net incomes of the cooperation are straight reflected by any incompatibility in the degree of dividends. Naceur et Al. ( 2006 ) focused on the relationship between dividend and ownership, liquidness, return on assets ( ROA ) , profitableness, investing, purchase ratio, size. The consequences indicate that extremely profitable houses with more stable net incomes can payout big dividends as they can afford big free hard currency flows. Furthermore, aggressive houses distribute larger dividends so as to run into the demand of investors. On the other manus, ownership concentration does non hold any impact on dividend payment. In fact, being closely held Tunisian houses witnessed less bureau struggles and stockholders did non fall back to dividends in order to cut down managerial discretion and protect their involvements. As such the liquidness of the stock market had a negative influence, which confirmed that the usage of the electronic dealing system in the TSE facilitated the realisation of capital additions, which reduced the demand for dividend payments. At last, the negative coefficient on size found in the full sample disappeared when regulated houses were excluded, therefore cut downing the strength of this factor. Research workers have proposed many different theories about the factors that affect a house ‘s dividend policy.

Kanwal Anil and Sujata Kapoor ( 2008 ) analyzed that The Determinants of Dividend Payout Ratio-A Study of Indian Information Technology Sector. The period under survey is 2000-2006 as it is known that the period of 5 to 6 old ages covers both recession and booming of IT industry. They stated that profitableness has ever been measured as a primary acerate leaf of dividend payout ratio. There are many other factors than profitableness besides that affect dividend determinations of an organisation that is hard currency flows, corporate revenue enhancement, gross revenues growing and market to book value ratio. They suggest that dividend payout ratio is positively related to net incomes, hard currency flows and it has inverse relationship with corporate revenue enhancements, gross revenues growing and market to book value ratio. Statistical techniques of correlativity and arrested development have been used to research the relationship between cardinal Variables. Thus, the chief subject of this survey is to acknowledge the assorted conditions that affect the determination of dividend payout policy of IT houses in India.

In short factors act uponing the corporate dividend policy, harmonizing to them, may well change from state to state because of fluctuations in revenue enhancement, legal and accounting policy. In position of these facts, the present survey purposes at placing the variables act uponing corporate dividend policy in Pakistan.

Chapter 3:

DEPENDENT AND INDEPENDENT VARIABLES

The principle of this survey is to measure the factors that have an impact on dividend of Oil & A ; Gas Exploration and Oil & A ; Gas Marketing sector of KSE. Dividend per portion is dependent variable and the three independent variables are size, profitableness and growing. These variables are discussed below.

3.1 Dependent Variables

3.1.1 Dividend per portion

Arthur A. Thompson in his book Crafting and Executing Strategy says dividend per portion is paid to stockholder on each portion. As indicated below.

DPS= Dividend after Share

Entire Share

3.2 Explanatory Variables

This thesis selected 3 variables used by different research workers Naceur et Al. ( 2006 ) and Hafeez Ahmed and Attiya Y. Javid ( 2009 ) .

3.2.1 Firm Size

Hafeez Ahmed and Attiya Y. Javid ( 2009 ) The house size has been calculated on the bases of its entire assets because a positive coefficient is expected from this variable as there is a really low opportunity of bankruptcy as in big more diversified houses and it can prolong higher degree of debt.

Scott and Martin ( 1975 ) found that the size of the house is an of import factor, which can impact the houses ‘ dividend and debt policies.

A negative impact has been found on the dividend payout policy by size of the house and the market capitalisations which show that alternatively of paying dividends to the stockholders the house prefers to put in its assets. The fiscal feature of size has been explained by the bounds of the house and market capitalisation. Harmonizing to the void hypothesis for this fiscal feature there is no relation between the market capitalisation and size with dividend payout ratio but the consequences show that there is an opposite and important relationship between dividend payout and MV. Hence void hypothesis is rejected. The grounds supported by the determination of Belans et Al ( 2007 ) , Jeong ( 2008 ) pervert from Avazian et Al ( 2006 ) .

Naceur et Al. ( 2006 ) the size of the house by entire market value ( LNSIZE ) and it is expected to be positively correlated with dividend paid. The literature suggests that size may be reciprocally related to the chance of bankruptcy ( Ferri and Jones 1979 ; Titman and Wessels 1988 ; Rajan and Zingales 1995 ) . In peculiar, larger houses should hold an easier entree to external capital markets and can borrow on better footings, Furthermore, larger houses tend to be more diversified and their hard currency flows are more regular and less volatile. Therefore, larger houses should be more willing to pay out higher dividends. Even the struggles betweebn creditors and stockholders are more terrible for smaller houses than the larger 1s.

Khamis Al-Yahyaee, Toan Pham, and Terry Walter ( 2006 ) step size of the house from Log of gross revenues. A house ‘s dividend policy is influenced by variables such as size. There is an advantageous place for larger houses to increase external financess in the capital markets and are less dependent of internal financess. Therefore there is a negative relationship between dependance on internal funding and the size of the house. Furthermore, there is a opportunity of lower bankruptcy chances in larger houses and therefore they are able to pay more dividends.

Therefore as per this research the hypothesis is:

H1= Firm size is positively associated with dividend payouts.

3.2.2 Firm Profitability

Empirical research found that there is a positive relationship between dividend output and profitableness. The more profitable the houses are, the more internal funding they would hold, and therefore are able to afford larger dividends. Some of them are as follow:

Al-Yahyaee et Al. ( 2006 ) measured profitableness by net incomes before involvement and revenue enhancements to entire assets as their alternate for profitableness. Hence a positive relationship between profitableness and dividend was expected. Since the one-year net incomes payout, the dividends hence seemed logical that more dividends were paid by profitable houses.

Naceur et Al. ( 2006 ) measured the profitableness by the return on assets ( ROA ) cyberspace income/total assets and it is positively correlated with dividend payments. Firms with high profitableness could afford larger free hard currency flows and therefore new investing chances. Therefore, paying higher dividends did non upset them. In the same vena and harmonizing to the picking order theory, houses preferred utilizing internal beginnings of funding foremost, so debt and eventually external equity obtained by stock issues. The more profitable the houses were, the more internal funding they would hold, therefore were able to afford larger dividends.

Hafeez Ahmed and Attiya Y. Javid ( 2009 ) measured Profitability Net Net incomes and Net incomes Per Share after revenue enhancement. The net net incomes show the positive relationship with the dividend output. The net net incomes after involvement, depreciation and after revenue enhancement have been used as the explanatory variable to analyze the function of net incomes to pay dividends.

Therefore as per this research the hypothesis is

H2= There is a positive relationship between a house ‘s profitableness and dividend payouts.

3.2.3 Firm Growth

Naceur et Al. ( 2006 ) measured investing and growing by MBV ( market value of equity/ book value of equity ) and one-year rate of growing of entire assets. Firms anticipated higher growing, when they established lower dividend payout ratio because growing entailed higher investing outgos. When houses retained higher proportion of gaining to finance future investings needed due to high cost of external funding, their dividend wage out in expectancy of future growing reduced. Hence, a negative relationship between dividend payout and expected growing was expected.

Al-Yahyaee et Al. ( 2006 ) calculated the growing chances by utilizing market-to-book ratio. A negative relationship was expected between growing chances and dividend. Large add-ons of capital were required by the houses sing significant success and rapid growing. Consequently, lower dividend payout policies were expected by growing of the houses. Similarly, the picking order theory foretell that more net incomes were retained by the houses holding a high proportion of market value followed by growing chances hence they were able to cut down the demand to increase new equity capital. Free hard currency flow theory besides foretells that there would be a lower free hard currency flow and lower dividend was paid by the houses with high growing chances.

On the other manus Hafeez Ahmed and Attiya Y. Javid ( 2009 ) argued with the above research workers. Harmonizing to the signaling theory the higher the house grows, the higher they pay dividends to their stockholders. The stockholders get signals from the growing of the houses holding high growing chance. The gross revenues growing has been used as placeholder of Growth in the empirical analysis of the survey and has been used as per centum alteration in gross revenues yearly as placeholder of growing.

Whereas Kanwal Anil and Sujata Kapoor ( 2008 ) , measured growing and investing by gross revenues growing and MTB. Hafeez Ahmed and Attiya Y. Javid ( 2009 ) measures investing as SLACK = accumulated retained earnings/ entire plus.

Therefore as per this research the hypothesis is

H3=Firm growing is negatively associated with dividend payouts.

Table 3.1

Summary of replacement Variables and Research Hypotheses

H1: Size

SIZE = Total assets

Positive

H2: Profitableness

ROA= net income/total assets

Positive

H3: Growth

GROWTH = gross revenues growing

Negative

CHAPTER4:

RESEARCH METHODS

[ [ [ 4.1Data Collection Method

The informations have been collected from Securities Exchange Commission of Pakistan, State Bank of Pakistan and the Karachi Stock Exchange. The variables of the survey are calculated from the Audited Annual Accounts of 6 houses for the period of 2001 to 2008 taking to about 84 observations for each variable and as such it is a long period and adequate to smooth out variable fluctuations. ( Rozeff, 1982 ) .

4.2 Sample

Sample Size consists of six companies from oil and gas geographic expedition and selling sectors in Pakistan, listed on Karachi Stock Exchange ( KSE ) .Data collected from twelvemonth 2001 to twelvemonth 2008.

4.3 Statistical Trial

Linear Regression trial was performed to analyse informations. Dividend output is a dependent variable whereas growing, size and profitableness are taken as independent variables.

4.4 Regression Model

This survey uses multiple arrested development analysis. This thesis estimates that

Y= I± + I? X1 + I? X2 + I? X3 + vitamin E

Y = Dividend per portion.

I± = Intercept of the equation.

I? X1= Change in coefficient of Firm size.

I? X2= Change in coefficient of Firm profitableness.

I? X3= Change in coefficient of Firm sale growing.

vitamin E = Error Term.

Chapter 5:

Consequence

5.1 Findingss and Interpretation of consequences

Table 5.1Model sum-up

Model

Roentgen

R Square

Adjusted R Square

1

.790

.624

.596

The capital “ R ” in this tabular array was coefficient of correlativity which was.790 which showed that there were positive and high correlativity between dependant and independent variable. The consequences suggested that 62.4 % fluctuation in dependent variable ( dividend per portion ) was due to independent variables ( size, profitableness and growing )

Adjusted R Square was an accommodation of R Square that adjusts for the figure of explanatory variable in a theoretical account. Unlike R Square, the adjusted R Square increased merely if the new variable improved the predictability of the theoretical account. Adjusted R Square showed that fluctuation in dividend per portion was 59 % by forecasters after seting the mistake footings.

Table 5.2 Anova

Model

Sum of Squares

Df

Mean Square

F

Sig.

1 Arrested development

Residual

Entire

3374.869

2029.819

5404.688

3

40

43

1124.956

50.745

22.169

.000 ( a )

Anova tabular array suggested that F ratio for the arrested development theoretical account was important, bespeaking arrested development theoretical account to be the best tantrum. Anova trial was important that indicated that this theoretical account could be used for anticipation intent. . Arrested development row displayed information about the fluctuation that was accounted for by the above theoretical account. Similarly, residuary row displayed information about the fluctuation that was non accounted for by the above theoretical account.

Table 5.3 Coefficient

Model

Unstandardized

Coefficient

Standardized

Coefficients

Collinearity

Statisticss

Bacillus

Std. Mistake

Beta

T

Sig

Thymine

VIF

( invariable )

Size

Profitableness

Growth

3.455 -.0002

66.74

0.0001

2.863

0.00006

15.995

0.00001

-.418

.445

.802

1.207

-3.177

4.173

6.565

.235

.003

.000

.000

.542

.824

.628

1.847

1.214

1.591

Harmonizing to the first hypothesis consequences indicated that the house ‘s size was important as shown in tabular array 5.3 which showed that size was negatively correlated with dividend at 1 % . Harmonizing to research worker ‘s hypothesis, the size could show a positive relationship but here its coefficient was negative which was rejected.

The consequence of the research workers Fama and French ( 2000 and 2001 ) , Lloyd and Jahera ( 1995 cited on holder 1998 ) , Aneel Kanwer ( 2002 ) , and Oskar kowalewki Oskar kowalewski and Ivan Stetsyukand Olesksandr Talavera ( 2007 ) showed that the size was positively related to dividend as they explained in their different articles of dividend as Fama and French ( 2000 and 2001 ) concluded that more dividends were collectible by big and more profitable houses. Lloyd and Jahera ( 1995 cited on holder 1998 ) concluded that those larger houses had easier contact to capital markets, which were more mature, hence allowing for higher dividend payout ratios and falling their dependance on internally generated fiscal support. Similarly Aneel Kanwer and Sujata Kapoor ( 2002 ) measured size with entire gross revenues and research workers found out that the size was positively related to dividend outputs. Smaller companies gave lower dividends as compared to larger companies. Another two research workers Oskar kowalewki and Ivan Stetsyukand Olesksandr Talavera ( 2007 ) made a research in Poland and they measured size with entire assets. They found out that size was positively related to dividends because more dividends were paid by companies, which were larger in size and had more assets.

The consequence of some other research workers ‘ like Hafeez and Attiya Y. Javid ( 2009 ) , Naceur et Al. ( 2006 ) showed that the size was negatively related to dividend as they mentioned in their articles as made by Hafeez Ahmed and Attiya Y. Javid ( 2009 ) on KSE ( non fiscal houses ) were similar to this thesis consequence i.e they measured size with natural logarithm of entire assets. This consequence indicated that the houses ‘ preferred to put in their assets instead than paying dividends to their stockholders holding a negative impact on dividend payout policy. Similarly Naceur et Al. ( 2006 ) made their research on the houses of the Tunisian Stock Market and they measured the size with logarithm of stock market capitalisation, they concluded that there were a negative relationship between size and dividend, but the negative relationship disappeared when regulated houses were removed.

The logic of this opposite position by the research worker was that different states had different environment, revenue enhancements, difference in civilization, different economic place and so on, in add-on to that, difference in industries and fiscal houses were the major grounds of differences in the positions of assorted research workers. The hypothesis of this thesis was positive because big size houses paid more dividends and hypothesis of assorted research workers was besides positive as the big size houses would gain more net income and hence, could pay more dividends to their stockholders but the consequence of this thesis was negative, because research workers used entire plus to mensurate size. The big houses dominated and might be involved in greater graduated table production, and therefore would administer less hard currency dividends as compared to their smaller opposite numbers.

Harmonizing to 2nd hypothesis Profitability was positively correlated with dividend, which was important at 1 % . This showed that more profitable houses gave more dividend than the house which was gaining less net income. The consequence of the research worker Hafeez Ahmed and Attiya Y. Javid ( 2009 ) measured profitableness with gaining per portion after revenue enhancement and Naceur et Al. ( 2006 ) they measured profitableness with ROA=net income/total assets which was similar to the consequence of this thesis. The consequences indicated that big free hard currency flow was afforded by the houses, which were extremely profitable and had more stable net incomes. Al-Yahyaee et Al. ( 2006 ) measured the profitableness by net incomes before involvement and revenue enhancements to entire assets as their placeholder for profitableness. Hence a positive relationship between profitableness and dividend was expected. Therefore the more the net income the more they would pay in signifier of dividend. Shammyla Naeem and Mohammad Nasr ( 2007 ) measured the profitableness with return on investings. They besides got the same decision i.e. the size was positively related to the dividend and the higher profitable houses paid more dividend.

Harmonizing to 3rd hypothesis growing was besides statistically important as shown in Table 5.3, the growing was negatively related to dividend but the consequence of this thesis differed from the hypothesis because it was positively related to the dividend hence this hypothesis was rejected. The decision was that turning houses were more geared to supply more dividends.

Some research workers besides found out growing to be positive, as the consequence of the research worker Naceur et Al. ( 2006 ) measured growing with one-year rate of growing of entire assets and found to be similar to this thesis consequence. The consequences indicated that aggressive houses distributed larger dividends so they were more appealing to the investors. The consequence of research by Hafeez and Attiya Y. Javid ( 2009 ) showed that the growing had been measured with sale. Harmonizing to the signaling theory the high growing houses were smoother to pay their dividends to stockholders. Growth signaled the stockholders about the houses holding high growing chances.

Whereas, some research workers result found out growing to be negative. Rozeff ( 1982 ) , Lloyd et Al. ( 1985 ) and Collins et Al. ( 1996 ) all showed significantly negative relationship between growing and dividend payout as Rozeff, ( 1982 ) obtained the consequences which were similar to our hypothesis that dividend payout was negatively related to growing due to investing demands for dearly-won external support and growing which was important at 5 % . Al-Yahyaee et Al. ( 2006 ) calculated the growing chances by utilizing market-to-book ratio and showed negative relationship between growing and dividend. The houses sing considerable success and fast growing required big add-ons of capital. Consequently, growing houses expected lower dividend payout policies. Kanwal Anil and Sujata Kapoor ( 2008 ) made their research on IT houses in India which concluded that dividend payout ratio was in an opposite relationship with growing. They measured growing by gross revenues growing and MTBV. Jianguo Chen and Nont Dhiensiri ( 2009 ) measured growing with Average growing rate of grosss, made their research on sample houses listed on NZSE which concluded that there was significantly negative relationship between growing and dividends payout ratio and the significance degree was 5 % .

The hypothesis of this thesis was negative because when the growing increased the house tended to pay more attending on their internal funding and they invested in their ain company instead than paying to the stockholders. The consequence of this thesis was positive because the growing was measured by gross revenues growing. The more gross revenues growing, the more would be the profitableness and therefore the company could bring forth gross and therefore more dividend was paid to their stockholders.

5.2 Hypothesis Assessment Summary

H1: There was an association between dividend per portion and house size. The first hypothesis for this research was Firm size positively associated with dividend payouts on the footing of statistical trial in which significance value was used at 1 % the hypothesis was accepted. Harmonizing to research worker ‘s hypothesis, the size could show a positive relation but here its coefficient was negative which rejected research worker ‘s hypothesis. Since, the size was besides statistically important the hypothesis for this thesis showed that the growing was negatively related to dividend hence, this hypothesis was rejected.

H2: There was an association between dividend per portion and house profitableness. The 2nd hypothesis for this research was that there was a positive relationship between a steadfast profitableness and dividend payouts on the footing of statistical trial in which important value was used at 1 % the hypothesis was accepted because the consequences for profitableness were important p= .000which was less than 0.01 ( 1 % degree of significance ) so it was important therefore it was concluded that Profitability was positively correlated with dividend. This showed that more profitable houses gave more dividend than the houses, which was gaining less net income.

H3: there was an association between dividend per portion and house growing. The 3rd hypothesis for this research was that steadfast growing was negatively associated with dividend payouts on the footing of statistical trial in which significance value was used at 1 % this hypothesis was accepted because the consequences for the growing were important p=.000 Which were less than 0.01 ( 1 % degree of significance ) but the consequence of this thesis differed from the hypothesis because it was positively related to the dividend hence this hypothesis was non rejected.

Table 5.4

Hypothesis

Proposed Consequence

Actual Consequence

Decision

H1: Size Firm size is positively associated with dividend payouts

Positive

Negative

Rejected

H2: Profitableness There is a positive relationship between a house ‘s profitableness and dividend payouts.

Positive

Positive

Accepted

H3: Growth Firm growing is negatively associated with dividend payouts.

Negative

Positive

Rejected

Chapter 6:

CONCLUSION, IMPLICATIONS AND RECOMMENDATIONS

6.1 Decision

In this research, three variables were tested to analyse their possible impact and relationship with dividend per portion, viz. size, profitableness and growing. The thesis uses multiple additive arrested development theoretical accounts, the information analysis covering from 2001 to 2008 of Oil & A ; gas sector in Pakistan. Results showed that dividend per portion and independent variables were statistically important.

Size was statistically important which showed that a direct relationship existed between house size and dividend per portion. Since, the size was important and a direct relationship existed between house size and dividend per portion but here the consequence showed an opposite relationship between dividend per portion and size. Therefore, the hypothesis of this research was rejected. This consequence was supported by the consequence of different research workers like Naceur et Al. ( 2006 ) , and Hafeez Ahmed and Attiya Y. Javid ( 2009 )

Profitableness was besides statistically important and therefore a positive relationship existed between the dividend and profitableness, this showed that H0 was rejected. The more the houses ‘ net income the larger the dividends. Researcher measured the profitableness by ROA. This consequence was supported by the consequence of different research workers for case, Naceur et Al. ( 2006 ) , Shammyla Naem and Mohammad Nasr ( 2007 ) , and Hafeez Ahmed and Attiya Y. Javid ( 2009 ) .

Growth was besides statistically important. There was a positive relationship between growing and dividend per portion which indicated that the hypothesis of this thesis was rejected because in this thesis the growing was negatively related. This consequence was supported by the consequence of research workers named Naceur et Al. ( 2006 ) , and Hafeez Ahmed and Attiya Y. Javid ( 2009 ) .

6.2 Implication and recommendation

In this research, three variables were tested to analyse their possible impact on dividend per portion, but survey of available literature reveals that there were some other variables that could hold an impact on dividend policy of a house such as monetary value to gaining ratio, net income border, debt to equity ratio, current ratio, available float, insider ownership, institutional ownership, and investing policy. Further researches can be carried out to prove the relationship of these variables on a house ‘s dividend policy and the sort of relation it has, can besides be easy tested. Dependent variable can besides be changed, in this consequence the dependant variable was dividend per portion but dividend output and dividend wage out ratio can besides be the dependant variable which will give different consequences.

As said above and mentioned earlier in debut, the figure of variables impacting the dividend payout policy, were legion. However, the three variables that had been taken into consideration for this thesis were really important to oil and gas sector. As per the research conducted by research worker, an chance taken to urge that these variables were the cardinal ingredients for any dividend analysis but would wish to emphasize on the fact that other factors or variables which were built-in due to the singularity of the company/industry being reviewed should besides be taken into consideration before geting at an sentiment on its several dividend policy.