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Title: Managerial Perspective Regarding Signaling Effects of Dividend Policy (A Case Study of Pakistan Stock Exchange)
Authors: Ali, Liaqat
Keywords: Management Sciences (Finance)
Issue Date: 2019
Publisher: Qurtaba University of Science & Information Technology, Peshawar.
Abstract: Introduction: The dividend signaling concludes that the increase or decrease in the dividend reflects both positive and negative signs about the future earning, therefore, these factors have significant effects on the firm share prices and the management always looks at these factors while making dividend decisions. The present study was conducted to evaluate the managerial perception for the signaling effect of dividend payout. Research study was conducted in non financial firms of Pakistan Stock Exchange. Objective: The objective of the study was to decode the managerial perception in the light of signaling theory and estimate the positive and negative influence of information in the market. Problem Statement: The study is unique in the sense that it checked the signaling effects by collecting data from managers of the firms. The previous studies were based on the numerical data and they neglect the emotions, perceptions and experiences of managers. The reason of selecting the managers is to select the person who is managing the firm for data collection. The current study tried to check the managers’ perceptions for dividend policy in the Pakistani market. Significance: The study is helpful for policy makers, because it added a significant portion in the literature for those who are interested to in getting the perception of the managers which compel them for the dividend declaration. The study is helpful for the investors to better understand the real thinking of the financial analyst who are controlling the dividend decisions of the firm. Methodology: A sample of 217 was estimated the formula stated by Krejcie and Morgan (1970). The study has used mixed methodology approach to get more accurate and precise findings about 12 the signaling effect of dividend payout in Pakistan Stock Exchange. Closed ended structure was adopted from quantitative methodology after evaluating the previous studies conducted in the different parts of the world. The questionnaire was based on multiple items and used five point Likert scale. The interview schedule was also conducted to evaluate the perception of financial managers regarding the dividend payout in the light of literature. Regression model was used for the answer of research questions posted. The study has selected the regression model to check the effect of independent variables on the dependent variables. Pearson Correlation model was selected to know the relationship between the independent variables and dependent variable. The study has included the factor analysis to know the validity of the components taken in the study by using the Principle Component Analysis (PCA). Findings: The findings of reliability statistics show that the Cronbach alpha of the variables are more than .70 and concluded that the variables are considered reliable for the data collection. The results of Pearson Correlation model reveal that current earnings, past dividend, liquidity, managerial perception, investor perception and share price have positive relationship with the dividend payout and dividend payout has negative relationship with taxation. The results of regression model states that Current earnings, past dividend, liquidity, taxation, managerial perception, investor perception and share prices have significant effects on the dividend payout in the non financial firms in Pakistan. The findings of interview schedule show that the investors are always interested in getting dividend all the time but to avoid the taxes, they prefer capital gain. It also concluded that previous dividend ratio cannot or sometimes it has minimal role in the estimation of dividend ratio for the present year. Consistent payment of dividend can be taken as the best managerial performance and will transmit a ‘good signal’ to the market. The theory of information content for the information asymmetry suggested that the mangers of thefirm are having more knowledge about the future of the company as compared to the outsiders, the changes in the dividend payment sometimes convey information about the ongoing performance of the firm. Contribution: The present study has used to test the signaling effect of dividend payout with support of signaling theory. The findings suggested that the dividend payout can be influence by the positive or negative information to the market which support the effectiveness of signaling theory in Pakistani market. The findings of interviews argued that the earnings of the firm is the factor which can lead to increase the share prices. The statement of bird-in-hand theory is in-line with the findings that the investors should realize their wealth before investing in the market which can lead to their preference between the capital gain and cash dividend. The statement can be support from the findings of Lintner (1962), Gordon (195) and theoretically the argument can be consistent with the findings of Miller and Modigliani (1961). The MM work has been considering the capital gain and cash dividend as the substitute for each other (Bhattacharya, 1979). Future Directions: A comprehensive study should be conducted on the taxation system in Pakistan and its effects on the investor’s perception and dividend payout. Due to the family ownership it is recommended that relationship among the firm dividend payout and ownership category in the market should be evaluated. The study should be conducted by taking large number of interviewees to better understand the market structure, theoretical implementations and variation in the dividend payout. Keywords: Managerial Perception, Dividend Payout, PSE, Interviews, Questionnaire etc
Gov't Doc #: 20166
Appears in Collections:PhD Thesis of All Public / Private Sector Universities / DAIs.

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