The study of Dividends in the market over the last few decades

The subject of dividend has been studied extensively in last few decennaries. Still it remained as one of the most problematic issue in the field of Finance. The contradictory nature and monolithic importance 0f dividend in finance had made it one of the most discussable subjects for research workers. Research workers in the yesteryear enclosed many facets of dividend ; few among them are positions about dividend, dividend payment effects on house value, kineticss and determiners of dividend policy, and dividend tendencies of different markets.

Lintner ( 1956 ) examined the distribution of income of corporations among dividends, retained net incomes and revenue enhancements utilizing informations from the old ages 1918 to 1941 as a preparation period and informations from the old ages 1942 to 1951 as the testing period. It was found that the basic determiners of dividends alterations are net income and anterior twelvemonth dividends. In add-on, houses attempt to go on a steady watercourse of dividend and tend to do a periodic partial accommodation to a mark payout ratio instead than dramatically altering their payout when a alteration in net incomes occurs. In the short tally, dividends are smoothed to avoid frequent alterations. This difference is rooted back to the important work of Modigliani and Miller ( 1961 ) , in which it was challenged in a perfect market status dividend policy did non impact the value of house. In contrast, Lintner ( 1962 ) and Gordon ( 1963 ) supported “ Bird-in-hand ” theory and argued that in the universe of ambiguity and imperfect information, high dividend payment is linked with high house value. In add-on, Black ( 1976 ) called dividend is great mystifier which need extended researched. Furthermore, the Brealey and Myers ( 2005 ) listed dividend as one of the top 10 important obscure issues in progress corporate finance. Harmonizing to Anil and Sujjata ( 2008 ) that emerging consensus is that no single factor entirely can depict dividend behaviour.

The bing corporate theories supported that hard currency flow and profitableness have important impact on dividend. The purpose of this survey was to cognize the impact of hard currency flow and profitableness on dividend payout of non fiscal houses in Pakistan market. This survey considered free hard currency flow and profitableness was most of import for non fiscal house in Pakistan market. Talat and Mirza ( 2010 ) conducted research related to ownership construction and hard currency flow as determiners of dividend payout policy. Harmonizing to that single ownership, hard currency flow sensitiveness, size, and purchase were negatively associated with dividend payout policy. In contrast, runing hard currency flow and profitableness was positively related to hard currency dividend. In add-on, Researcher concluded that managerial ownership, single ownership, runing hard currency flow, and size were of import determiners of dividend behaviour whereas, purchase and hard currency flow sensitiveness did non lend significantly in finding the degree of corporate dividend payment. DeAngelo and DeAngelo ( 1990 ) and Reddy ( 2004 ) found important relation between hard currency flow and dividend alterations.

Problem Statement

In the field of corporate finance, the dividend was considered as one of the most notable issues. The chief intent to analyze the impact of hard currency flow and profitableness on dividend payout of non fiscal house in Pakistan market was to analyse the hard currency dividend behaviour of developing states house. In add-on, survey was conducted to happen out how strongly these two variables free hard currency flow and profitableness have impact on the dividend payout because, profitableness was most likely used as determiners of dividend payout in most of the old researches ‘ but free hard currency flow was non taken excessively much in old research. Furthermore, how these two variables serve as an index for dividend payout.


H1: There is important impact of free hard currency flow on dividend payout.

H2: There is important impact of profitableness on dividend payout.

Outline of the Study

The research structured follows. Chapter one was consist on the debut of the thesis, it is indispensable to reexamine the positions and theoretical background of dividend, the statement O job, range and nonsubjective, hypothesis. Chapter two consisted of reappraisal of literature given by assorted writers, theories on dividend and impact of hard currency flow and profitableness on dividend payout. Chapter three explained methodological analysis, it consisted of justification of the choice of the variables, the sampling and research design, the information technique and hypothesis. Chapter four represent the analysis of consequences which were taken after the information processing. Chapter five composed of concluding consequence, decision and recommendation. Chapter six consisted of mentions.

Chapter 2:


Since 1956, dividend has ever considered one of the most interested and investigated subject in universe of finance. Lintner ( 1956 ) analyzed the distribution of income of corporation among dividends, retained net incomes, and revenue enhancements utilizing informations from the old ages 1918 to 1941. It was founded the basic determiners of dividends alterations are net income and anterior twelvemonth dividends. In add-on, houses tried to go on a stable flow of dividend and likely made a periodic partial accommodation to a mark payout ratio alternatively radically altering payout when gaining changed.

Jensen and Meckling ( 1976 ) paid attending toward bureau cost hypothesis and described that dividend restricted the financess under direction control, as a consequence seting them under rigorous capital market scrutiny. Owner ‘ duty was reduced to pull off the quality of investing and to command the outgo on director requirements.

Marke, Langrehr, and Hexter ( 1998 ) conducted research on dividend policy determiners. Research workers had taken focal point of house, natural log of gross revenues of house, indoors ownership for house, no of common stockholder for house, free hard currency flow for house, gross revenues growing of house, and standard divergence of returns o f house as determiners of dividend policy. Writers concluded that corporate focal point has negative impact on dividend payout. While inside ownership had besides negative impact, harmonizing to researcher the houses have greater inside ownership have little dividend payout. In add-on, the houses with higher free hard currency flow have higher dividend payout and lower payout ratio of houses with higher standard divergence of returns.

William and Nanda ( 1994 ) conducted research on free hard currency flow, stockholder value, and the undistributed net incomes revenue enhancement of 1936 and 1937. In this survey researcher tried to research the investor reaction toward the awaited lessening in free hard currency flow presented to corporate directors. In add-on, research workers suggested bureau costs as partial determiners of dividend policy. To avoid the bureau job corporate have to pay higher dividend and imposed higher revenue enhancement on undistributed net income so the job of bureau cost handled expeditiously.

The survey conducted on determiners of dividend payout ratio in Ghanna byAmidu and Abor ( 2006 ) . In this survey 20 listed houses of Ghana Stock Exchange were used as a sample which shows 76 % of the entire listed house in Ghana Stock Exchange. They have taken the Payout Ratio as dependant variable and defined as dividend per portion divided by gaining per portion. The included the explanatory variable profitableness, frisk ( hazard ) , hard currency flows ( hard currency ) , corporate revenue enhancement ( revenue enhancement ) , institutional retentions ( INSH ) , Gross saless Growth and Market to Book value ( MTBV ) .they find that more profitable houses pay more dividend and profitableness is positively related to dividend payout. In add-on, hard currency flow and revenue enhancements are besides positively related to dividend payout. Further, they besides concluded there is a positive relationship between addition in liquidness and dividend payout. Their consequences suggest negative relationship between hazard, institutional retention, growing, market to book value and dividend payout. The houses with the earning volatility find hard to pay low and no dividends.

Al-Malkawi ( 2007 ) worked on determiners of corporate dividend payout policy in Jordan. Researcher used a steadfast degree panel informations of all publically traded houses on the Amman Stock Exchange between 1989 and 2000. Researcher used dividend payout as a depended variable and bureau cost, Ownership, one-year portion turnover, market to book ratio, market capitalisation of common equity, fiscal purchase ratio, profitableness ratio, and revenue enhancements as independent variables. By utilizing Tobit specification research worker concluded that positive relationship between size, age, and profitableness with dividend payout and negative relationship between signaling device, ownership, and revenue enhancements in Jordan.

Fairchild ( 2010 ) worked on Dividend policy, signaling and free hard currency flow: an incorporate attack. Researcher has tried to analyze the dividend policy by taking merely two hypothesis signaling and free hard currency flow. In order to understand the composite environment of dividend policy, signaling game is developed in which most of the information possesses by directors than investors about the quality of the houses. The signaling hypothesis shows that asymmetric information between directors and investor, dividend work as signal sing current public presentation and future chance. The survey found that high dividend has positive consequence on the house public presentation, in term of supplying a positive signal for current public presentation and every bit will as future scenario. In add-on, dividend payout reduces the free hard currency flow job, which may pull the director to put in negative NPV undertaking for personal involvement. But if the undertaking shows positive NPV so investing chances are available which lead toward the higher dividend in future.

Gill, Nahum, and Rajendra ( 2007 ) worked on determiners of dividend payout ratio in United States. In this survey researcher extend the Amidu and Joshua, and Anil and Kapoor happening for the American service and fabrication houses. Researcher took same variables into history such as profitableness, revenue enhancement, market to book value, hard currency flow, and sale growing. The sample size was 266 out of 500 fiscal studies. Finding for fabrication houses that dividend payout ratio is the map of net income border, revenue enhancement, and market to book ratio We besides found that the consequences are different when the dividend payout ratio is defined as the ratio between the hard currency dividend that the after-tax hard currency flow, non the after revenue enhancement net incomes of the companies.

Reddy ( 2006 ) , studied the dividend behaviour of Indian corporate houses, tendency, and determiners and tried to find the behaviour of the houses listed on Bombay Stock Exchange ( BSE ) with the aid of trade off theory and signaling theory hypothesis. The analysis of dividend tendency shows that stock traded on New York Stock Exchange ( NSE ) and ( BSE ) signify that the per centum of houses paying dividends has declined from 60.5 % in 1990 to 32.1 % in 2001 and there is merely few houses paying dividend systematically. Furthermore the dividends paying houses are more profitable, big in size, and growing does n’t look to deter Indian houses from paying higher dividends. The corporate revenue enhancement or revenue enhancement penchant theory does n’t look to keep true in Indian context. Finally the dividend alterations appear to signal modern-day and lagged gaining public presentation instead than future net incomes public presentation.

Baker, Farrelly and Edelman ( 1986 ) studied 318 New York stock exchange houses and concluded that the major determiners of dividend payments are awaited degree of future net incomes and form of past dividends. Pruitt and Gitman ( 1991 ) asked fiscal directors of the 1000 largest U.S. and reported that, current and past twelvemonth net incomes are of import factors act uponing dividend payments. Baker and Powell ( 2000 ) conclude from their study of NYSE-listed houses that dividend determiners are industry specific and awaited degree of future net incomes is the major determiners.

Anil and Kapoor ( 2008 ) surveies Indian information engineering sector for determiners of dividend payout ratio. The period for survey 2000-2006 screens both recessive and flourishing stage of Indian information engineering sector. Researcher concluded liquidness and beta ( twelvemonth to twelvemonth variableness in net incomes ) was found to be a noteworthy determiner of dividend payout ratio. In add-on, writers concluded there was recession and from 2003 onwards IT sector witnessed exponential growing. After 2006 additive growing was seen in IT sector.

Recently in Pakistani position, Ahmed and Attiya ( 2009 ) investigated finding factors of dividend policy in emerging economic system of Pakistan on a sample of 320 houses listed at KSE from 2001 to 2006. Research workers concluded that Pakistan ‘s listed houses rely more on the current net incomes than past dividend. In add-on, writers highlighted some determiners that may act upon the dividend payout policies. First the consequences demonstrated that the houses holding high profitableness with stable net incomes can afford larger free hard currency flows therefore pay out larger dividends. The houses with larger investing chances can easy act upon and play of import function to determinant of dividend payout policies in Pakistan. The ownership construction has the major impact to find the dividend payout policy in Pakistan. The houses with the major inside portion retentions pay more dividends to its stockholders in Pakistan. Furthermore the growing of the houses does n’t hold any impact on the dividend payout. The market liquidness of the houses has a positive influence which confirms that houses with higher market liquidness pay more dividends. The size is the extremely negative and important which shows the houses invest in their assets instead than paying dividends to its stockholder.

2.1 Dividend irrelevancy theory:

Miller and Modigliani ( 1961 ) proposed that dividend policy is irrelevant to the stockholder and shareholder wealth was changeless in the universe of perfect market status and any growing in the current payout is financed by literally priced stock gross revenues. The basic premise was that direction paid 100 per centum payout in every period. Other premises were as follow.

First, market is perfect capital market that means no revenue enhancements on dealing cost, individual purchaser and marketer non influenced monetary value, and everyone have free entree to information.

Second, investors are rational and value of securities was based on the discounted hereafter hard currency flow to investor.

Third, director act as a agent of stockholders, and there was no uncertainness about the investing policy of the house.

2.2 Bird-in-hand theory:

Al-Malkawi ( 2007 ) emphasized that dividend valued otherwise from retained net incomes ( capital additions ) in universe of uncertainness and dissymmetry information. “ A bird in manus ( dividend ) is valued more than two in the shrub ( capital addition ) ” . Investors ever preferred dividends to maintained net incomes due to uncertainness of future hard currency flow. Although, this statement has been widely criticized and has non received strong empirical support, but, it was supported by Gordon and Shapiro ( 1956 ) , Lintner ( 1962 ) , and Walter ( 1963 ) . The basic premises were as followed

First, investors have unequal information sing the profitableness of a house.

Second, hard currency dividend was taxed at a higher rate when capital addition was realized on the sale of portion.

Third, dividend serves as a signal of expected hard currency flow.

2.3 Agency cost and free hard currency flow theory:

Ross ( 2008 ) bureau cost is the cost of the struggle of involvement that exists among stockholders and direction. It was happened when direction act for ain involvement instead than stockholders involvement who own the house. This could be direct and indirect. It was in contrast to premise of Millar and Modigliani ( 1961 ) that troughs act as a agent of stockholders This is slightly doubtful, as the proprietors of the house are different from the direction. Directors are bound to transport out some activities, which could be dearly-won to stockholders, such as set abouting unprofitable investings that would give inordinate returns to them, and unnecessarily high direction compensation ( Al-Malkawi, 2007 ) . These costs are borne by stockholders ; hence, stockholders of houses with extra free hard currency flow would necessitate high dividend payments alternatively. Agency cost may besides originate between stockholders and bondholders: while stockholders require more dividends, bondholders require fewer dividends than stockholders by seting in topographic point a debt compact to guarantee handiness of hard currency for their debt refund. Easterbrook ( 1984 ) besides identified two bureau costs: the cost of monitoring directors and the cost of hazard antipathy on the portion of directors. Jensen ‘s free hard currency flow/overinvestment hypothesis ( 1988 ) provides an alternate account for the positive relationship between the way of the dividend alteration and the stock monetary value reaction. Jensen argues that directors tend to keep hard currency to put in negative NPV undertakings for their ain public-service corporation maximization. The bureau costs that consequence from this overinvestment lessening the value of the house. Like the signaling hypothesis, the FCF statement suggests there should be a positive relationship is the way of the dividend policy alteration and the stock monetary value reaction. However, the FCF statement differentiates itself with regard to the degree of growing chances faced by the house. If a house initiated a hard currency dividend, FCF arguments contend there are fewer financess available for dearly-won overinvestment. Likewise, if company did’nt wage dividend, the strongest signifier of a lessening would cut down the value of the house because there are more financess available to put in less present value undertakings. The FCF hypothesis assumes larger stock monetary value volatility for the houses who have few growing chances as compared to the houses with many growing chances.

There is disagreement between different research workers on dividend policy. Allen and Rachim ( 1996 ) in Australia found no important relationship between dividend policy and stock monetary value volatility. Harmonizing to Gordon ( 1963 ) the stock monetary value volatility is influenced by dividend payout. The houses who pay big dividend have minimal hazards in footings of stock monetary value value. Some of conjectural mechanism besides suggests the cosmopolitan relationship of dividend output and dividend payout ratio with stock monetary value volatility.

Jensen ‘s and Meckling in ( 1976 ) developed Agency cost statement which proposed that dividend payout lower the cost of financess and increase the hard currency flows for the company. The company after paying hard currency dividends to stock holders would hold less hard currency in custodies of the directors to put at below the cost of capital.

Harmonizing to Miller and Rock ( 1985 ) ; Asquith and Mullin, 1983 ; Born, Moser and Officer ( 1984 ) dividend declaration provide information to the portion holders to calculate the fiscal place of the company and the present house ‘s net incomes. This besides depends on the beginning of information that either it is dubious or non to react on proclamation of dividend. Hence, there remains dissension boulder clay yet, the relation of dividend output and stock monetary value volatility and it is still unexplained and is considered as problematic in corporate finance.

2.4 Signing hypothesis:

Though Miller and Modigliani ( 1961 ) assumed that investors and direction have perfect cognition about a house, this has been countered by many research workers, as direction who look after the house tend to hold more precise and timely information about the house than outside investors. This, hence, creates a spread between directors and investors ; to bridge this spread, direction usage dividends as a tool to convey private information to stockholders.

( Al-Malkawi,2007 ) . Petit ( 1972 ) observed that the sum of dividends paid seems to transport great information about the chances of a house ; this can be evidenced by the motion of portion monetary value. An addition in dividends may be interpreted as good intelligence and brighter chances, and frailty versa. But Lintner ( 1956 ) observed that direction are loath to cut down dividends even when there is a demand to make so, and merely increase dividends when it is believed that net incomes have for good increased. Rate of return consequence, as discussed by Gordon ( 1963 ) , is that a house with low payout and low dividend output may be given to be valued more in footings of future investing chances ( Donaldson, 1961 ) . Consequently, its stock monetary value may be more sensitive to altering estimations of rates of return over distant clip periods. Therefore spread outing houses although may hold lower payout ratio and dividend output, exhibit monetary value stableness. This may be because dividend outputs and payout ratio serves as placeholders for the sum of projected growing chances. If prognosiss of net incomes from growing chances are less dependable than prognosiss of returns on assets in topographic point, houses with low payout and low dividend output may hold greater monetary value volatility.

Chapter 3:


3.1 Method of Data Collection

Required informations was collected from Karachi Stock Exchange as given by State Bank of Pakistan in publication of Balance Sheet Analysis of Joint Stock Companies Listed on the KSE ( 2005-2009 ) . The period of survey covered five old ages, 2005-09. The sample size of 100 non-financial houses was taken from all non fiscal house listed at KSE. The needed sample was chosen on the footing of hard currency dividend paid by houses ‘ at-least for two old ages. The sample represents about every industry.

3.2 Sample Size

Sample of 100 non-financial houses was collected from KSE. Merely houses were used in the samples that paid hard currency dividend for at least two old ages houses that included the industrial houses and service providing houses listed on the KSE 100 Index form 2005-2009. The impact of the hard currency flow and profitableness on dividend payout was analyzed on all of the non-financial houses selected as the sample.

3.3 Research Model Developed

There were assorted fiscal factors of the non-financial houses which affected the Dividend payout of the houses. This research survey analyzed the impact of free hard currency flow and profitableness on the dividend payout.

3.3.1 Dividend payout

Dividend payout and dividend sum are taken as the dependent variables. Since dividend payout is the by and large used option for dividend policy, about every fiscal research worker has used payout as a placeholder for corporate dividend policy ( See for illustration Gugler, 2003 ; Reddy and Rath, 2005 ; Papadopoulos, 2007 ; Al-Malkawi, 2007 ; Ahmed & A ; Attiya, 2009 ) . In order to cipher dividend payout was calculated as hard currency dividend per portion divided by gaining per portion.

3.3.2 Earning per portion

Harmonizing to Hafeez and Attiya ( 2009 ) high profitableness with changeless net incomes can pull off to pay for larger free hard currency flows as a consequence to pay out larger dividends. The net incomes per portion after revenue enhancement were used as independent variable. Gaining per portion after revenue enhancement was used because dividend has been paid after involvement, revenue enhancements and after depreciation and calculated as net net incomes divided by figure of portions.

H1: There is important impact of gaining per portion on dividend payout

3.3.3 Return on Equity

This variable is used in different old surveies such as: Abor ( 2005 ) , Miller ( 2007 ) , Al-Ajmi et Al. ( 2009 ) , and Ebaid ( 2009 ) etc. Some writers measured profitableness or public presentation by three measurings such Gross net income border ( GPM ) , Return on Equity ( ROE ) , and Return on Assets ( ROA ) and same forecasters Ebaid ( 2009 ) . Likely consequences with this variable are same as revealed by Abor ( 2005 ) and Ebaid ( 2009 ) such as: Significance and positive relationship with dividend payout. Return on Equity is considered best step of house profitableness. Return on Equity ( ROE ) is one step of how expeditiously a company uses its assets to bring forth net incomes. ROE was calculated by spliting Net Income subtraction preferred dividend by Share holder equity

H2: There is important impact of Return on Equity on dividend payout.

3.3.4 Free Cash flow

Harmonizing to Jensen ‘s ( 1986 ) free hard currency flow hypothesis, companies choose to utilize their hard currency resources to put in profitable undertakings foremost ; dividend is paid out of residuary. From a company ‘s point of position, hard currency generated from operations dramas an of import function in make up one’s minding the degree of payout, among all three beginnings of hard currency flows i.e. operating ; puting and funding, hard currency generated from operations is considered as most desirable beginning of financess for the company for distribution of dividends. Anil and Sujjata ( 2008 ) besides found hard currency flow from operations as the most important determiner of dividend policy in Indian IT industry. AA step of fiscal public presentation calculated as Net income subtraction depreciation subtraction alteration in working capital subtraction alteration in capital outgo. Free hard currency flow ( FCF ) represents the hard currency that a company is able to bring forth afterA puting out the money required to keep or spread out its plus base.A FreeA hard currency flow is of import because itA allows a company toA pursue chances that enhance stockholder value.

H3: There is a important impact of free hard currency flow on dividend payout.

The theoretical account developed was a additive theoretical account and its specifications are provided below:

Div payout = a0 + a1EPS + a2ROE + a3FCF + N”

Dividend payout = Dividend per portion divided by gaining per portion

EPS = Net income divided by figure of portion outstanding

ROE =Net income subtraction preferable dividend divided by common stockholder equity

FCF =Net income minus Depreciation subtraction alteration in working capital subtraction alteration in

Capital outgo

?„ = the mistake term

3.4 Statistical Technique

Multiple Linear Regression Analysis ( MLR ) technique was used for this research survey to analyze the impact of the typical fiscal features of the non-financial houses on their dividend payout of the selected houses ; Statistical Package for the Social Sciences ( SPSS ) was used for the scrutiny of the secondary informations.

Chapter 4:


The sample of 100 non-financial houses from Karachi Stock Exchange was taken into consideration. This research survey used multiple arrested development analysis ( MLR ) . Researcher examined the behaviour of non-financial houses of KSE about dividend payout. The selected technique was used to analyze the impact of hard currency flow and profitableness on dividend payout.

4.1 Finding and Interpretation of the consequences

In the beginning, the arrested development technique was applied on collected informations by utilizing SPSS, and there was no individual variable was important. It was clear from the consequence that there was the high co-linearity among the independent variables of the dividend payout and this means there was strong interrelationship nowadays among the forecasters. Return on assets and net net income border was omitted from the informations, therefore, the issue of co-linearity was resolved.

Now, continuing with the analysis of the consequences because issue of co-linearity was addressed. The reading and analysis is presented in the following subdivisions of this research survey.

Table 4.1: Model Summary



R Sq.




Tables 4.1 depict the sum-up about the arrested development theoretical account. The R square of 8.4 % showed that all the forecasters of dividend payout together explained 8.4 % fluctuation in the dependant variable and the staying fluctuation was unexplained or concealed forecaster were non included in the theoretical account.

Table 4.2: Analysis of variance


Sum of Squares


Mean Square



Arrested development












The tabular array 4.2 checked the significance of the additive arrested development theoretical account in such a manner that the dependability of the informations file sing the pertinence of the arrested development technique can be understood from the above tabular array ; nevertheless, ANOVA tabular array was dependable trial of look intoing the additive arrested development theoretical account ‘s ability to explicate any fluctuation in the dependent variable of liquidness. This was absolutely obvious from the sig value of.000 that meant that the additive arrested development theoretical account was extremely important for the informations collected for the research survey conducted. In add-on, ANOVA explained that all agencies are non equal.

Table 4.3: Coefficients


Unstandardized Coefficients

Standardized Coefficients



Co-linearity Statisticss


Std. Mistake




( Constant )


























In table4.3 the concluding theoretical account of arrested development included merely three independent variable that were free hard currency flow, gaining per portion, and return on equity These variables were included in the theoretical account due to extremely significantly depicting the relation with dependent variable dividend payout.

4.2 Hypothesis Assessment Summary

The hypothesis of research was alone fiscal factors had important impact on the non-financial houses ‘ dividend payout determination. These fiscal features were hard currency flow taken as free hard currency flow of houses and profitableness taken as gaining per portion and return on Equity of houses. This research tasted single fiscal features and concluded the consequence as follow.

Table 4.4: Hypothesis Assessment Summary






There is important impact of free hard currency flow on dividend payout.




There is a important impact of Return on equity on dividend payout.




There is as important impact of Gaining per Share on dividend payout.



Chapter 5:




It was concluded with support of consequences of this research survey return on equity, gaining per portion, and free hard currency flow were important independent variables in Pakistani market. These consequence were fiting with the survey under taken by Hafeez and Attiya ( 2009 ) in Pakistani context, Researchers concluded houses with high profitableness and with stable gaining can afford larger free hard currency flow hence pay out larger dividends to its stockholder. In add-on, Talat and Hammad ( 2010 ) examined the ownership construction and hard currency flow as determiners of dividend policy. Research workers concluded that companies in which high proportion of portion were occupied by directors and single were more loath of wage high dividends. In contrast, companies in which managerial and single ownership is low paid less dividends. It was besides concluded that companies holding high operating hard currency flow addition companies possible to pay high dividend and it was considered hard currency flow sensitiveness cut down the companies payout but still it was non determined as possible determiners of corporate payout in Pakistan.

5.2 Discussions

Profitableness and free hard currency flow could put important impact on dividend payout in Pakistani context. Hafeez and Attiya ( 2009 ) was besides considered profitableness as important determiner of dividend payout, But survey conducted by Talat and Hammad ( 2010 ) concluded operating hard currency flow can non see important determiner of dividend payout in Pakistani market. This research considered that free hard currency flow and profitableness measured through gaining per portion and returns on equity have important impact on dividend payout of the companies.

5.3 Implication and Recommendations

This research was limited to non-financial companies listed on Karachi Stock Exchange Pakistan. The needed informations collected from 100 non-financial houses listed at KES for the period of 2005 t0 2009. Merely houses were included in samples which were paid hard currency dividend for atleast two old ages. It is suggested that such type of survey should be carried out in other states of Asia. Further, it besides suggested that other factor except one analyzed in this survey should be researched in more extended mode so the dividend payout policy and its kineticss became clearer.

5.4 Future Research

This research addressed the jobs of investor, direction and other research worker music director in analysing and detecting the behaviour of house sing their investing determinations. Research pupils who want to work farther on dividend payout could be benefited by this survey. In add-on, all non fiscal house will acquire profit from this survey because this research survey taken all major sector into the consideration and survey clarified the impact of free hard currency flow and profitableness on dividend payout.