THE IMPACT OF CORPORATE GOVERNANCE ON DIVIDEND POLICY OF PAKISTAN STOCK EXCHANGE LISTED COMPANIES (A CASE OF CEMENT SECTOR)

Abstract

Dividend ratio is always a debatable term. Researchers have conducted comprehensive studies on the determinants of dividend payout ratio decisions. Also, currently the practices of corporate governance are one of the major determinants of dividend policy of the company. Corporate governance is the practices, mechanism and system to manage and control the company in a way to protect the shareholder’s wealth in long term specifically and all stakeholders in general. This study investigates to fill the gap that whether the companies that are more focused and involved in the practices of corporate governance declare more or less dividend payout ratio for the investors in Pakistan. To gain the objectives of current study the descriptive form of research design is followed in current study A list of 20 firms in the cement sector on the basis of data available were chosen as the population. While sample includes 18 companies which comprise 80% of the population. The time series for the analysis is from 2009 to 2019 on the basis of data availability on state bank of Pakistan website and annual reports on companies’ website. The current study revealed that board, Audit Board, Constitution of the audit board and CEO Dual position are having a positive relationship with the dividend payout ratio while the Constitution of the board, Director’s ownership and Investment growth are having a negative relationship with the dividend payout ratio. While the Size of Audit Board contributes more to the dividend policy ratio and similarly impact of Size of the board, Constitution of the board, Audit Board, Constitution of the audit board, Director’s ownership and Investment Growth on dividend policy ratio was significant while the impact of CEO Dual position on dividend policy ratio was insignificant. Regarding the implications, the fundamental purpose of any company is the creation and delivery of long-term sustainable value in a manner consistent with their obligations as a responsible corporate citizen, then the firms should therefore view corporate governance not as an end in itself but a vital facilitator to the creation of long- term value for all stakeholders.