Table of Contents

ABSTRACT................................................................................................................................................5
DEDICATION.............................................................................................................................................6
ACKNOWLEDGEMENT...........................................................................................................................7
Chapter 1..................................................................................................................................................10
1.

Introduction.....................................................................................................................................10
1.1

Background of the Study.........................................................................................................10

1.2

Determinants of Dividend Policy............................................................................................12

1.3

Significance of Dividend Policy...............................................................................................13

1.4

Stock Price and Dividend Policy.............................................................................................14

1.5

Stock Price Volatility...............................................................................................................15

1.6

Determinants of Stock Price Volatility...................................................................................16

1.7

Volatility in Pakistans Equity Market-Karachi Stock Exchange........................................18

1.8

Problem Statement:.................................................................................................................20

1.9

Research Question...................................................................................................................20

1.10

Research Objectives.................................................................................................................20

1.11

Hypotheses Of Study...............................................................................................................21

1.12

Significance of the Study.........................................................................................................22

Literature Review....................................................................................................................................23
2.

Literature Review........................................................................................................................23

2.1.

Dividend Theories....................................................................................................................23

2.2.

Gordons Model (1962)............................................................................................................28

2.3.

Walters Model (1963).............................................................................................................29

2.4.

Dividend and Risk Theories....................................................................................................40

2.5.

Rate of Return Effect...............................................................................................................41

Chapter # 3...............................................................................................................................................57
Theoretical Frame Work.........................................................................................................................57
3.1

Theoretical Model....................................................................................................................58

3.2

Econometric Model..................................................................................................................59

3.3

VARIABLE DESCRIPTION..................................................................................................61

3.3.1

PRICE VOLATILITY.........................................................................................................61

3.3.2

DIVIDEND YIELD (DY)....................................................................................................62

3.3.3

DIVIDEND PAYOUT RATIO (DPR).................................................................................62

3.3.4

FIRM SIZE (SZ)..................................................................................................................63

3.3.5

FINANCIAL LEVERAGE (LV).........................................................................................63

3.3.6

ASSETS GROWTH (GR)...................................................................................................64

3.3.7

EARNING VOLATILITY (EV)..........................................................................................65

3.3.8

EARNING PER SHARE (EPS)..........................................................................................65

3.3.9

RETURN ON EQUITY (ROE)...........................................................................................66

3.3.10

RETURN ON ASSEST (ROA)............................................................................................66

Chapter # 4...............................................................................................................................................68
Data Methodology:..................................................................................................................................68
4.

Data...............................................................................................................................................68

4.1.1.

Data Set:...............................................................................................................................68

4.1.2.

Time Span:...........................................................................................................................68

4.1.3.

Sample and Data collection:................................................................................................68

4.2.

Methodology:...........................................................................................................................69

4.3.

Fixed Effect Vs Random Effect...............................................................................................70

4.4.

Husaman Test:..........................................................................................................................71

Chapter # 5...............................................................................................................................................72
Results and Finding.................................................................................................................................72
5.

Result and Findings.........................................................................................................................72

5.1.

Descriptive Statistics................................................................................................................72

5.2.

Panel Unit Root Test................................................................................................................74

5.3.

Correlation:..............................................................................................................................75

5.4.

Hausman Test...........................................................................................................................76

5.5.

Fixed Effect..............................................................................................................................76

Chapter # 6...............................................................................................................................................78
Conclusion, Limitations and Recommendations...................................................................................78
6.1.

Conclusion................................................................................................................................78

6.2.

Theoretical Implication...........................................................................................................78

6.3.

Limitations of study.................................................................................................................79

6.4.

Recommendations for Further Research...............................................................................79