Dividend Policy and Corporate Governance Quality: An Empirical Investigation

Abstract

The study intends to investigate the relationship between corporate governance quality and dividend policy in Pakistan. The sample of the study covers Karachi Stock Exchange 100 index listed companies from the period of 2008 to 2011. The results have confirmed the support of outcome model in Pakistan which confirms that firm’s dividend policy moves with the direction of corporate governance quality. Moreover, there are positive associations between size of the firms, profitability and dividend policy. Finally, investment opportunities and leverage are negatively related with dividend policy. These results, taken as a whole, indicate that better governed firms used to pay more dividends and it implies that firm-level corporate governance and country-level investor protections are complements to each other rather than substitution.