Corporate Governance and Dividend Policy: Evidence from Shariah-Compliant and Conventional Firms in Pakistan

Abstract

 This research aims at examining the role in which corporate Governance affects Dividend Policy of traditional stocks and shariah stocks.This paper study the topic of GMM estimation method, to efficiently provide the results in Pakistani companies in the KSE 100-index. Data is obtained all the audited annual reports of companies. In this paper, a panel data involving the non-financial companies of the sugar and allied sector, the fertilizer industry, and the automobile parts and accessories listed at Pakistan Stock Exchange were used; this is in the pre-COVID period of 2010-2019. It is a long run sample 10 years sample in which corporate governance (composition of the board, ownership structure) is considered the independent variables and dividend policy as the dependent variables. This paper demonstrates opposite effects of the elements of corporate governance on the payment of dividends. Although boardrelated features are mostly negatively correlated with dividend payments, which can be a deal breaker to a revenue-oriented investor, institutional and insider ownership positively correlate with dividend payments. The various features of the boards of the firms in the overall dynamic panel are reducing the dividend outflow that can be detrimental to the dividend loving investors but on the other hand, institutional and insider holding are strengthening the dividend flow. But, in Sharia compliant panel, the payout of dividend is affected beneficially because of the independence of the board, board size, institutional, and insider holdings.The study contributes towards the governance of the sharia requirements to come up with the quest in the promotion of the Islamic investment.