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- Title
Earnings Response Coefficient as a determinant of dividend policy: Testing Free Cash Flow Theory on non-financial dividend paying firms in the Pakistan Stock Exchange.
- Authors
Ullah, Hamid; Ihsan, Anjum
- Abstract
This study tests Jensen's free cash ow theory which states that managers overinvest retained earnings in negative NPV projects. A data set of 238 firms listed on the Pakistan Stock Exchange for the period 1999 to 2016 is used. The results of the panel regression model show a significant positive as- sociation of the earnings response coefficient and dividend payout ratio, which supports the free cash ow theory in listed Pakistani firms. Moreover, the impo- sition of the capital gains tax and the financial crisis has further strengthened the positive relationship between ERC and dividend payout ratio.
- Subjects
PAKISTAN; PAKISTAN Stock Exchange Ltd.; DIVIDEND policy; STOCK exchanges; FREE cash flow; CAPITAL gains tax; DIVIDENDS
- Publication
IBA Business Review, 2019, Vol 14, Issue 1, p53
- ISSN
1990-6587
- Publication type
Article
- DOI
10.54784/1990-6587.1024