Relationship:Financial Leverage and DPO Ratios of Cos Listed at KSE

Dividends are important for the shareholders as well as for the managers of the company.In a firm dividend decision affects the capital structure of a firm. Presence of debt in the capital structure of a firm restricts the firm in certain areas and these restrictions sometimes compel the companies to go for the omission of dividends or to set a lower dividend payout ratio. Lower dividend payout refers to the higher retained earnings, higher liquidity and lesser chances of getting into more debt. This study aims to find the relationship and impact of financial leverage on the dividend policy of the firms in the Chemical and Pharmaceutical Sector and the Fuel and Energy Sector listed at Karachi Stock Exchange (Pakistan). The results of the study revealed that Fuel and Energy Sector is more indebted than the Chemical and Pharmaceutical Sector and the financial leverage has a negative relationship with the dividend payout ratio of the firms.

Autorentext

Author is a Lecturer at Kinnaird College for women Lahore. She has 10 years experience of teaching Accounting & Finance courses to Bachelor, Master and M.Phil levels at renowned Universities at Islamabad and Lahore, like Bahria University, COMSATS-Islamabad, International Islamic University, University of Arid Agriculture, and SZABIST Islamabad.