The Contributing Factor of Dividend Imbursement Behavior: An Empirical Study on Textile Sector of Pakistan

Abstract

The dividend payment behavior of the corporate firms is determined by number of factors which have never been researched in Pakistani textile industry. The main aim of this study is to identify those factors which likely to play an important role in determining the dividend payment behavior of the textile firms in Pakistan. The data of 169 textile firms listed on KSE is collected from the Balance Sheet Analysis (official document issued by SBP) for the year of 2003 to2015. This pooled data based on 1218 firm year observations is analyzed by using Logistic Regression Model and overall model of this study is found to be significant with X2(8, N= 1218) = 421.25, p<0.0001 and this significance of the model is also supported by Hosmer and Lemeshow Test (p-value > 0.05). The results indicate that firm growth and debt to equity ratio have negative relationship with the firms’ dividend payment behavior while rests of the factors are positively related to dividend payment behavior of studied firms. Our findings also indicate that size of the firm, earnings, debt to equity ratio; volatility and tangibility are the significant factors of firms’ dividend payment behavior. More specifically the size of the firm is found to be the most dominant factor in context of the Pakistan’s textile sector. We also found that there are very less number of large firms which regularly pay dividends but most of the firms use their earnings for growth rather than paying it as dividends. In addition, they often use long term loans for financing rather than issuing stocks.