Determinants of Firm’s Dividend Policy “A Quantitative Decision Making Approach

Abstract

The issue of dividend policy, despite availability of extensive literature is stillinconclusive. Therefore determining the different financial characteristics of firms’ dividend policy is the objective of this research. For this study, the sample data of 82 firms of non-financial
sector from 2014 to 2024 was compiled from the annual published reports available on the official website of state bank of Pakistan. Therefore different statistical analyses were performed based on correlation, Panelunit root test, Pooled OLS, Fixed and Random effect
Models of regression through Eviews 12. The result of fixed effect model provided an important insight of market free float and stock trading volume those addressing a gap in existing literature. The findings indicate that market free float positively influences the firm
dividend policy at a 1% significance level. This is because the higher liquidity and stable payout attract investors. Conversely, the stock trading volume negatively affects dividend policy because the shareholders may prefer lower-taxed capital gains over dividends.
Key words: Dividend policy, market free float, stock trading volume, signaling andbirds in hands theory.