Early View
Previous Article: An evaluation of the forecast performance of DSGE and VAR Models: The case of a developing country
Next Article: Emotional intensity: An additional dimension to understand emotional confidence and purchase intentions
Browse Early View Articles
Next Article: Emotional intensity: An additional dimension to understand emotional confidence and purchase intentions
Browse Early View Articles
RESEARCH ARTICLE
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
Hamid Ullah and Anjum IhsanFirst published: 31 May, 2019
Abstract
This study tests Jensen's free cash flow 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 association of the earnings response coefficient and dividend payout ratio, which supports the free cash flow theory in listed Pakistani firms. Moreover, the imposition of the capital gains tax and the financial crisis has further strengthened the positive relationship between ERC and dividend payout ratio.
Keywords: Free cash flow · Dividend payout · Capital gains tax · Pakistani firms.