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Solving the Puzzle of Relative Importance of Dividends and Retained Earnings in Stock Valuation: A Case of Karachi Stock Exchange
Heritage International College, University of South Asia, Lahore, Pakistan
Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
Heritage International College, University of South Asia, Lahore, Pakistan
- 1 Heritage International College, University of South Asia, Lahore, Pakistan
- 2 Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
- 3 Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
- 4 Department of Business Administration, Faculty of Management Sciences, National Textile University, Faisalabad, Pakistan
- 5 Heritage International College, University of South Asia, Lahore, Pakistan
Theoretical Economics Letters·Volume 04 (2014)·Pages 681–690·Published 7 October 2014·DOI10.4236/tel.2014.48086
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Abstract
Despite the growing debate on the stock price valuation, it has become a complex puzzle. Various theories, models and explanations have been provided to solve this confusing riddle. This study contributes to this debate by determining the relative importance of stock dividends and retained earnings regarding stock price valuation in Karachi Stock Exchange. Data for the analysis of this study were collected from the 66 nonfinancial companies that were included in KSE-100 index for a period from 2007 to 2010. This study found the evidence that dividends are more important variable than the retained earning regarding the explanatory power of stock prices in Karachi Stock Exchange. Practical implications are also provided in the study.
KeywordsDividendsRetained EarningsStock ValuationKarachi Stock Exchange
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