Comparative Analysis of Determinants of Dividend in Oil and Gas Sector of Pakistan

Abstract

Dividend policy is an important aspect of the organization‟s corporate policies about which many researchers argued. It has become one of the most debatable topic for researchers due to the vagueness of its theories on the significance of dividend policy while indicating firm‟s value.

In this competitive environment the challenge to financial experts is to develop a dividend policy aiming at maximizing shareholder‟s wealth by efficient utility of investment. So, there is a need to find out the determinants of dividend payout policy that ultimately affect the firm‟s performance. These include firm size, debt, profitability, liquidity and sales. The main purpose of this research is to explore the dividend policy determinants of concerned firms by using a conceptual model that may help in increasing firms‟ performance and shareholders‟ interest.

The firms of oil and gas field of Pakistan were selected as sample for this research and to analyze the determinants of dividend payout requires practical efforts. For this purpose, various types of statistical techniques have been used namely descriptive statistics, correlation and regression analysis. Entire sample was analyzed on yearly basis for more comprehensive understanding from 2011 to 2018.

The findings of the study indicated that there is no single best dividend policy that fits on all firms both at micro and macro level. Due to the differences in the conditions that correspond to firm-specific (financial policies, production processes, management style, Human Resource Management etc.) as well as industry-specific (social, cultural, political, technical, economic environment etc.) every firm decides its own dividend policy that tends to the potential long term success of the business. In this scenario, a unique dividend policy doesn't seem a good fit for all the firms.