An Empirical Investigation of Dividend Policy Determinants in Pakistani Listed Companies: Insights from Agency Theory

Abstract

This article employs empirical methods to study the reasons affecting the dividend policies of listed companies in Pakistan, revealing findings that contrast with those from foreign studies. While dividend policy is typically used abroad as a tool to mitigate agency costs, in Pakistan, it reflects that the current dividend policy is a product of unresolved agency problems. The unique shareholding structure and governance structure significantly impact the choice of dividend forms. The controlling shareholders of listed companies tend to transfer cash from the listed company through cash dividends; there is wastefulness in retaining funds within the listed companies through stock dividends, which does not maximize shareholder interests. Additionally, the size of the enterprise also significantly affects the choice of dividend form.