Dividend preferences: evidence from panel data

Abstract

The study aims to investigate the dividend preferences in Pakistani capital market and further deals with the investigation of cash dividend preference of poorly performing firms list on Karachi Stock exchange. The study utilized the financial data for 2001-2011 of listed Pakistani firms to examine the behavior of distribution of cash dividends. Panel regression statistical technique was used. From the analysis, it is originated that poorly performing firms having lesser portion of tradable shares pay dividends in cash. The study finds that the cash dividend distribution behavior of poorly performing firms and describes the preference of directors. Further, low performing firms prefer cash dividends as compared to stock dividends as long as they have large percentage of directors or financial institutions or block-holders’ ownership of nontransferable shares. Furthermore, if a firm has mix of directors, financial institutions and block-holders’ ownership of nontransferable shares then the firm also prefer cash dividends.