The impact of dividend policy on firm performance in manufacture sector of Pakistan

Abstract

This research has given significant information on the various correlations between Dividend Payout Ratio, Earnings per Share (EPS), Price to Earnings Ratio (P/E), ROA (ROA), and ROE (ROE) regarding the companies being assessed. Data were collecting using annual reports of 10 companies and 10 years Data. From the correlation analysis, Dividend Payout Ratio and EPS had positive correlation coefficients with ROA and ROE, and this proved that they were influential variables in the firm’s financial performance. In contrast, there was no clear relationship between the P/E ratio and changes in the value in ROA and ROE and that makes this measure rather ineffective in the given context. We used IBM SPSS for multiple regression analyses further vindicated these findings but EPS stood out as the most significant determinant in both models for ROA and ROE. The DPR also influenced the returns on assets and equity most especially and therefore was an important factor in the model. Nevertheless, the variable of the P/E ratio was also nonsignificant in the regression models, which confirms the conclusion that common financial ratios can sometimes fail to reveal peculiarities of the financial performance of the companies in the given sample.