Corporate Diversification and Divided Policy: Evidence from Pakistan Stock Exchange

Abstract

The aim of this study is to analyze how corporate diversification influences dividend policy. The sample of the study is 162 non-financial sector firms in Pakistan, with the sample from 2012 to 2021. The present study is carried out based on secondary data. OLS regression analysis is used for the analysis. Overall analysis reveal that industrial diversified firms have significant impact on dividend payout ratio. The results show that companies in diversified industries have more stable and varied income streams, allowing them to routinely distribute a bigger amount of their earnings as dividends to shareholders. In contrast geographical diversified firms show significant impact on dividend yield. It indicates that enterprises with a diverse customer base and lower risk exposure have more stable cash flows and greater dividend yields. The fact is geographic diversification gives operational flexibility, risk reduction, and a competitive advantage, allowing enterprises to make consistent dividend payments. The study's findings are useful for Pakistani businesses, investors, and politicians. They emphasize the impact of dividend policy on diversification and sector-specific dynamics. These findings can be used to drive strategic decisions and policy activities targeted at improving dividend attractiveness, managing investor relations, and fostering long-term financial practices in Pakistan's business environment. This study contributes to our understanding of the impact of diversification types on firm-level dividend policy.