Determinants of Dividend Policy and Its Role: Empirical Evidence in Textile Sector of Pakistan

Purpose: The purpose of this study is to find out the relationship between dividend policy and its factors focusing the Textile sector of Pakistan. There is a positive as well as negative relationship exists between determinants and dividend policy. Design: The data of this study is gathered from the financial statements of textiles companies of Pakistan. The sample of one hundred and ten companies is used from the period 2009 to 2014(www.kse.com.pk). The relationships are computed by regression results like fixed effect and random effect. Dividend Policy is taken as a dependent variable and leverage, profitability, liquidity and free cash flow are taken as independent variables. Findings: The results of this study show a positive relation between dividend payout policy and profitability because if the company’ earning per share is high then it will pay dividend to its shareholders. There is positive relation between free cash flow and dividend payout policy and negative relation between dividend policy and liquidity and leverage of the firms.Research Limitation and suggestions: The findings of the study are limited because there are many others factors that affect the dividend policy. I have taken only four variables like leverage, profitability, liquidity and free cash flow between dividend policy. More studies can be conducted to explore others factors that affect the dividend policy and its role. Keywords: Leverage, Profitability, Liquidity, Free Cash Flow, dividend Payou