Corporate Payout Policy and Market Capitalization

Corporate Payout policy had been discussed since decades with different names and assumption. But still it’s open for discussion as there is contradiction among researchers on this issue. Although payout policy is discussed with different assumptions but it is never discussed in relation to Market capitalization. Therefore, author chooses this topic for research. Present study examines the relationship between corporate payout policy and market capitalization by studying payout ratio and dividend yield as measures of payout policy and controlling other variables of size, growth, EPS, Leverage, GDP growth, and Interest rates. Different statistical techniques of correlation, regression, fixed effect and random effect are applied on pooled and panel data to find out the relationship between corporate payout policy and market capitalization. The results show that measures of corporate payout policy, dividend yield and payout ratio has strong negative correlation with market capitalization. Control variables of size and leverage have positive significant correlation with market capitalization while higher earnings per share are leading it negatively and these relationships are statistic

Allah Rakha, MBIT: Studied Business Finance at Institute of Business & Information Technology, University of the Punjab Lahore, PAKISTAN. Project Coordinator at SwenggCo Software.