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Influence of Financial Leverage on Firm’s Dividend Policy: The case of Pakistan’s Manufacturing Sector 1923-2926

Abstract

Aim and Objectives: Dividends are a portion of the company’s earnings given to the class of shareholders in the form of cash and property. Shareholders are paid to maintain the existing shareholders, and it helps the company portray a sound image. The study aims to identify the impact of financial leverage on the firm’s dividend policy in Pakistan.

Methodology: In terms of data collection, this research collects time-series data for the period of 2017 to 2020 for selected financial variables of the firms. ADF Augmented Dickey-Fuller test is applied first to examine the type of variables. In the next step, the Granger causality test is applied to inspect the short-run association amid variables.

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Introduction

According to Mounas, Iqbal and Basheer (2020), dividend policy is considered a widely discussed issue for the company’s stakeholders. It has further been observed that dividend policies attract shareholders and helps to generate investments in companies. According to Padmini and Ratnadi (2020), dividends are a portion of the company’s earnings given to the class of shareholders in the form of cash and property. Shareholders are paid to maintain the existing shareholders, and it helps the company portray a sound image. However, it has been observed that during the financial instability of an organisation, the trend of paying dividends is not restricted, and many companies are forced to lower their dividend payouts.

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References

Ahmed, F., Awais, I. and Kashif, M., 2018. Financial leverage and firms’ performance: Empirical evidence from KSE-100 Index. Etikonomi17(1), pp.45-56.

Ahmed, F., Rafay, A. and Ahmed, A., 2018. Dividend payout policy of conventional banking and Islamic banking in Pakistan. Al-Iqtishad Journal of Islamic Economics10(1), pp.135-152.

Gohar, R. and Alam, M.S., 2018. Determinants and Behavior of Dividend Policy in Pakistani Listed Companies. Journal of Finance and Investment Analysis7(3), pp.1-9.

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