CORPORATE GOVERNANCE AND DIVIDEND PAYOUT POLICY: A STUDY OF KSE LISTED FIRMS OF PAKISTAN

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Muhammad Arslan ORCID logo, Rashid Zaman ORCID logo

https://doi.org/10.22495/cocv13i1c1p4

Abstract

In recent years corporate governance has become promising area of research. The main objective of this study is to determine the relationship between corporate governance and payout policies. The study used the data of 100 KSE listed companies for the period of year 2007 to 2013. The advanced level of statistical methods are employed, consist of logic regression analysis and the comparative average of various groups. The corporate governance index includes the ratio of non-duty members of the board, board size, the dual responsibility of the CEO, the amount of stock owned by institutional investors, size of the auditing company, audit report quality and auditor replacement. Results of this study suggest that dividend is the result of the quality of corporate governance, and in companies where the rights of shareholders are not observed; opportunistic directors employ free flowing funds to invest in projects and fields that enhance their own prestige, grandeur and reputation. Biphasic results showed a meaningful correlation between the profitability of operations, liquidity, asset structure, corporate size and financial leverage and the payout policy. A relatively weak relationship exists between asset structure dividend payout policy while no meaningful relationship exists between growth opportunities and the latter.

Keywords: Agency Theory, Corporate Governance, Dividend Payout Policy, Pakistan, CEO, KSE

How to cite this paper: Arslan, M., Zaman, R. (2015). Corporate governance and dividend payout policy: A study of KSE listed firms of Pakistan. Corporate Ownership & Control, 13(1-1), 175-183. https://doi.org/10.22495/cocv13i1c1p4