Examining the Role of Corporate Dividend Policy and its Impact on the Stock Prices of the Firms Listed on PSX

Asif Saeed Naji; Muhammad Shujaat Saleem; Marium Javed

doi:10.52633/xy2qg592

Authors

Asif Saeed Naji Bahria University, Karachi, Pakistan. Author
Muhammad Shujaat Saleem Iqra University, Karachi, Pakistan. Author
Marium Javed Hamdard University, Karachi, Pakistan. Author

DOI:

https://doi.org/10.52633/xy2qg592

Keywords:

Dividend Yield, Retention Ratio, Earnings Per Share, Dividend Per Share

Abstract

The concept of dividend policy pertains to the strategic decision-making process through which a company determines the proportion of its profits to be distributed as dividends to shareholders versus the amount retained as earnings for reinvestment in future growth opportunities. This policy plays a crucial role not only in influencing shareholder returns but also in shaping the firm’s overall financial strategy and stock price dynamics. This research investigates the key elements of corporate dividend policy that influence share prices within the context of the oil and gas sector of the Pakistan Stock Exchange (PSE). The study explores a range of variables, including Dividend Per Share (DPS), Earnings Per Share (EPS), Dividend Yield (DY), Payout Ratio (POR), Retention Ratio (RR), along with macroeconomic factors such as GDP, interest rates, and inflation. The dependent variable in this analysis is the market price per share, while the independent variables encompass DPS, EPS, DY, POR, RR, and the macroeconomic factors. Utilizing secondary data from the oil and gas sector, the findings reveal that DPS, EPS, POR, and DY significantly impact stock prices, whereas RR appears to have no significant effect. These results align with existing literature on the topic, contributing to a broader understanding of the dynamics between corporate dividend policies and market valuation.

Author Biographies

Asif Saeed Naji, Bahria University, Karachi, Pakistan.

Bahria University, Karachi, Pakistan.
Muhammad Shujaat Saleem, Iqra University, Karachi, Pakistan.

Iqra University, Karachi, Pakistan.
Marium Javed, Hamdard University, Karachi, Pakistan.

Lecturer, Faculty of Management Sciences, Hamdard University, Karachi, Pakistan.

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