Managerial views about dividend policy in Pakistan

Purpose – Very little is known about the influences on dividend decisions in Pakistan, despite the importance of the market in the region and the nation's non-standard tax system. This study therefore aims to provide detailed evidence regarding this issue by examining the views of those charged with the decisions in practice. Design/methodology/approach – The study reports the findings from interviews with 23 Pakistani company officials about influences on their firms' dividend policies. A semi-structured interview document was used to guide the discussions. The interviewees chosen ensure that a wide spread of professional and industrial backgrounds were covered in the study. Findings – The results suggest that, despite differences in environmental idiosyncrasies, the dividend decision-making process in Pakistani companies is similar in many important respects to that in the USA and other developed markets. However, unlike in earlier studies, the interviewees suggested that past dividends do not influence current dividend levels in Pakistan and respondents were not reluctant to announce news of a dividend cut; instead, firms focus only on current earnings and company liquidity when deciding on a disbursement level. Originality/value – The study suggests that views about dividends in Pakistan differ from those reported in other markets in a number of important respects. Some, but not all of this evidence relates to the Pakistan taxation system, where until very recently share dividends (as with all capital gains) were tax exempt.