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The second phase of the research includes the interview of the 23 executives of the listed companies of the Karachi Stock Exchange. The interviews are conducted for the financial analysts as well. The interviewees recommend that there is less consistency in setting the installment level than that reported on the stock market. The organization executives attest that the profit payout of their organizations vacillated as per current income, yet with each one firm making its approach on a specially appointed premise as indicated by its circumstances and economic situations. The results from the meetings demonstrated the deficiency in any basic equation that would permit finishes of the sort emerging nations to be attracted by the market Pakistan. Besides, the interviewees propose that profit payouts are so regulars in Pakistan that speculators are mostly unconcerned about such variability. On the basis of the interviews conducted, the following t-test is performed to get the results. The results depict the opinion of the representatives of the firms about the impact assessment of the dividend announcements on the prices of the shares.

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The t-test has been performed to find out the changes or fluctuations in the result of the values of the firms by announcing the dividends in Pakistan. The test is performed to find out the differences between the fluctuations being done for the values of shares in the Karachi Stock Market before and after the dividends have been announced. It shows the trend of the fluctuations in the country. The results reflect that there is a considerable amount of difference in the level of the values of the shares before and after the announcements of the dividends (p = 0.00). The results also reflect the positive value that is the indication that the maximum number of executives and financial analysts of the firms believes that there is a huge impact of dividend announcements on the value of their firm’s shares. So it can be rightly concluded that there is a relationship between the both of them.

Table: t-Statistic Test for Determining the Fluctuations in Value of Shares on Dividend Announcements

Mean Standard Deviation Error Mean t df. Sig.(p)
1.42 3.0 0.2 6.5 184 0

Source: Field Data

The interviews show that the strategies and dividend policies are aimed at increasing the value of the firm and the share prices of the firms. The firms are also enhancing the values of the firms and the prices of the shares in the stock markets to gain more profits. The study also revealed that the various regulatory bodies are taking measures to control this enhancement factor. The Karachi Stock Exchange is the basic backbone of the economy of the country. The business is dependent on the working of the floor of the stock market. So the policies and strategies must be drawn by keeping in mind the usability of the firm.


The event study is defined as the analysis of the relationship between the economic events and the security prices. The study is used to calculate the unexpected returns due to the different events occurring in the market. These events may include the announcements about the dividend, earnings, or changes in the regulations of the government. The environment of Pakistan is very unpredictable. The regulations are also very predictable. Apart from all of it, a sample of 500 events has been taken to do the research related to the event based study. It helps in calculating the unexpected returns. The research in this way includes more parametric tests along with non-parametric tests. The day t0 is considered to be a day when the announcements are made. Now here the signaling hypothesis is applicable that if the changes are shown in dividend the unexpected return would become to zero. The returns must be calculated over a period of 21 days. The formula used is as follow: Urit = Rit – E (Rit). Further examination demonstrates that when firms are distributed to nine gatherings on the premise of both their profit and income change, no noteworthy strange returns were recorded for the advertisement date. As opposed to these discoveries for the occasion ponder; an alternate picture rises up out of a dissection of the meetings. Both organization authorities and budgetary examiners accepted that news of a profit did pass on essential data about organization prospects to outside financial specialists. Eighty-seven percent of the organization authorities and fiscal examiners underpinned the thought that an expand (cut) in profits typically prompts an ascent (fall) in offer costs. Then again, the respondents accepted that the desires of the business play a significant part in deciding any change in offer costs. Likewise, the speculators recognized that they considered the clarifications given by the organization of any profit cut. The shareholders, particularly family-possessed organizations, In Pakistan affected the profit choices in a substantive way.


The results of the research have been based on the formal regression analysis model. The formal analysis is done to analyze the relation between the effects of earnings and the dividend announcements. It is found with the help of regression analysis. The method of regression analysis was first used by Easton in Australia. This model explains that the cumulative returns that are abnormal for a number of periods are regressed against the fluctuations in the earnings per share (EPS) and the dividend per share (DPS). It is irrespective of the dummy variables or with dummy variables for every dividend earning group present under consideration. The regression models used for the research are:

AR = γ0 + γ1ΔDPSi+ γ2 ΔEPSi+ Ui

AR = δ0 + δ1ΔDPSi+ δ2 ΔEPSi+ δ3 (+, +) + δ4 (+, -) + δ5 (+, 0) + δ6 (-, +) + δ7 (- , 0)

+ δ8 (0, +) + δ9 (0, -) + δ10 (0, 0)

The change in the percentage of the dividend and earnings of the firm (+, -) is the reflection of the dummy variable increase in dividend and the decrease in earning. The variable (-,-) is excluded from in order to avoid the multicollinearity. It gives the results in negative values, so it is not feasible for the firms.


There is the data for the period of ten days before and after the announcement of dividends compared to identify whether the announcement makes an impact on the share price. For tracing the effect of the dividend announcements, there were 163 companies listed on the Karachi Stock Exchange over the period of 2011-2013. In order to provide, more complete information related this effect, interviews with companies’ executives are conducted. These interviews are conducted to reveal the factors of dividend policies that determine the impact of dividend announcements on share prices. There were 18 executives interviewed out of 23 using their e-mails. The questionnaires were sent to the executives via mails. The results of the analysis are statistically tested with the help of Wilcoxon signed rank test. Significance was tested based on a two-tailed basis. The information obtained in the course of the current research will help evaluate the importance of dividend disbursement in forming share prices. This area of the current research is relatively unexplored in Pakistan.

The research is implied to give the both quantitative and qualitative results. The event study has been done to conclude the results. The conducted event study is completed quite successfully. The data on a daily basis is used to examine the effect of dividends on the value of the firm. The daily use of data gives a complete picture rather than using the weekly or yearly data. The likelihood of the contamination of the data is decreased to the minimum by using this approach. On account, of the semi-organized meetings, the respondents might not have explained on the genuine picture of their associations - they may have disguised negative actualities, and such disguise may have inclined the investigation of the meetings. At long last, as noted somewhere else in the proposition, rising stock exchanges acts uniquely in contrast to created securities exchanges yet the study has utilized the same models being utilized in the earth, for example, Linter’s behavioral models of profit arrangements.


This exploration makes various commitments to the money writing all in all and to studies about the Pakistani advertises specifically. In the first place, the after effects of the occasions study reject the indicating hypo research of profit approach. The discoveries demonstrate that no profits could be earned for the advertisement date by exchanging with profit news; it 199 infer that financial specialists cannot procure anomalous benefit of the publication dates. Therefore, procedures, which may give beneficial open doors in different markets if profit change is effectively expected, won't work in Pakistan. Second, the discoveries of the current study demonstrate a lot of consistency with the results from examinations of other developing stock exchanges; the discoveries propose that developing markets carry on in an unexpected way of their created business sector partners.

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The aftereffects of the proposal in this way fortify the thought that models appropriate in a created securities exchange may not be very suitable for the connection between developing stock exchanges. Thus, the current discoveries additionally help the general idea that the studies were directed at the U.S. and the UK need to be recreated in different nations at distinctive phases of improvement with their own particular financial and institutional settings. Third, the meetings uncover that most speculators in Pakistan are examiners who base their choices of gossipy tidbits as opposed to directing modern specialized or money related investigation. The vast majority of these theorists exchange security with emulating the buys and offers of a couple of expensive institutional speculators; these substantial institutional financial specialists may abuse their strength in the business for their own particular increases. This control can prompt securities exchange emergencies, (for example, the KSE accident of March 2005). In this way, controllers must consider some unsophisticated speculators who overwhelm developing business sector ventures in Pakistan. Such speculators need to be taught about the ramifications of things, for example, profits from offer costs.

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