IMPACT OF CORPORATE GOVERNANCE ON DIVIDEND AND INVESTMENT DECISION

This study examines the corporate governance in the relationship between investment decisions and dividend payout in Pakistan. Using governance metrics based antitakeover provisions and inside ownership. Based on the agency theory estimates consider the effect of two conflicting hypotheses about the effect of corporate governance on dividend payouts: The outcome and substitution hypotheses and second effect on investments decisions. A sample of 300 non-financial firms is selected from Pakistani listed firm for the period 2011-2017. A panel regression is applied. The results suggest that firms earn and grow more they are capable of paying dividends. The results reveal that as economic conditions deteriorate and Pakistani firms reduce their dividend payments. It is concluded that good governance has strong influence on dividend policy of listed manufacturing companies listed at PSE. We also find that firms with weaker corporate governance structures actually have smaller cash reserves. The positive relationship between dividend yield and corporate governance structures such as board composition, ownership structures, and number of information announce in a year and shareholder rights etc. indicate that firms implementing corporate governance strategies pay higher dividends. The results suggest that firms earn and grow more they are capable of paying dividends. This study concludes that the substitute model hypothesis is supported using different governance variables, but no outcome effect is identified.