Role of Insider and Individual Ownership Structure in Dividend Payout Policy: Evidence from Pakistan

Abstract

Corporate dividend policy has received a generous amount of attention by financial researchers since the last five decades. Researchers found dividends to be one of the important factors defining the firm's value. There are various cognitive factors of the dividend policy in the firms and among these, the ownership structure is found to be the most influential in devising the dividend policy in Pakistan. An agency theory plays a crucial role in explaining the relationship of dividend policy and ownership structure. This study articulates the relation of insider ownership and individual ownership with dividend payout policy of the firm. For this purpose data has been collected from 100 non-financial firms listed at Karachi Stock Exchange (KSE 100 index) for the period of 2007 to 2011.Ordinary Least Square regression technique has been used to reveal empirical results. The results of current study revealed that insider ownership and individual ownership both have a significant negative influence on dividend payments. Profitability is significant and positively related with dividend payouts. Moreover, size and leverage are negatively related to corporate dividend policy.