Institutional shareholdings and corporate dividend policy in Pakistan

Abstract

The present study investigates the impact of institutional ownership and growth opportunities on dividend policy based on the sample of 120 Listed Companies of Karachi Stock Exchange (KSE), Pakistan, during 2002 to 2007. The estimated results, using OLS and Tobit regression models, suggest that dividend payouts are positively affected by growth opportunities, proportion of shares held by insurance companies and profitability and negatively affected by leverage. However, no significant impact of ownership by Modarbah, NIT and miscellaneous institutions on dividend payout is observed. Large companies are less likely to pay high dividends but the relationship of size with dividend payout is insignificant. Estimated results are robust to alternative proxy of dividend policy that is, Dividend Intensity. Key words: Dividend policy, growth opportunities, institutional ownership, Tobit regression.

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