Dividend Perspective Investment: An Analysis of Group Affiliated and Standalone Firms

Abstract

In developing countries, business groups are the predominant form of organization and are key to determining how capital is allocated and how corporations are financed. In Pakistan, there are approximately 30 family-based groups which undertake up to 60 per cent of all industrial activities. The empirical evidence in this study sheds light on whether there are systematic differences between group affiliated firms and standalone firms in their dividend payout practice. It employs a panel of food companies listed in the Pakistan Stock Exchange from period 2013-2022 and applies the dynamic panel Generalized Method of Moments (GMM) estimation technique. The findings of this study concludes that group-affiliated companies pay significantly higher dividends than stand-alone companies. Furthermore, the dividend payments are negatively associated with firm size with large firms paying lower dividend payments than small firms. The result adds valuable contribution to the literature on the corporate governance and dividend policy in emerging countries by analysing the impact of the group membership on dividend policies.