Board structure and dividend smoothing: A case of Pakistani listed firms

Zahid Ali · Assad Ullah · Arshad Ali


The purpose of this study is to empirically examine the effects of ownership and board structure on dividend smoothing for listed non-financial firms for the period 2005-2015 on the Pakistan Stock Exchange (PSX) in the light of agency and information asymmetry theory. Two measures, speed of adjustment and relative volatility are used to estimate dividend smoothing. Tobit regression is used for analyzing the effects of board structure on dividend smoothing measured via speed of adjustment while OLS is used for relative volatility. Additionally, the study applies the technique of principal component analysis (PCA) for board index. The results reveal that firms with large boards have a high level of dividend smoothing in Pakistan. They less frequently increase, cut, initiate and omit dividends. The substitution role of board independence is depicted by the negative association of board independence with dividend smoothing. Furthermore, independent audit committees and dividend smoothing are also found to be negatively associated.

Keywords: Dividend smoothing · Corporate governance · Substitution · Pakistan.

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