Comparative Analysis of the Dividend Policy of Islamic and Conventional Banking in Pakistan

Abstract

The aim of this study is to find out the comparison between the Islamic and Conventional banks in terms of the dividend payout policy. This study is confined to the Islamic and conventional banking industry operating in Pakistan. For that one Islamic banking and one Conventional bank has been selected. The quarterly data for the both banks have been gathered from annual reports of both banks from the year 2011 till 2020. The data has been analyzed using Ordinary Least square regression in the statistical software STATA 14 version. The results of the study revealed that the higher dividend is paid to the shareholders by the conventional banks. Further, the results stated that the debt to equity ratio has the significant impact on the dividend payout policy for Islamic bank. The debt to assets had no impact on the dividend payout policy while current ratio and net profit margin negatively affected the dividend payout policy of the Islamic bank. Further, for the conventional bank results revealed that the current ratio and debt to equity had insignificant impact while the debt to assets and Net profit margin negatively impact on the dividend payout policy of the conventional bank. This study suggests the higher management of Islamic banks as well as the conventional Banks to give proper attention for setting up the dividend policy as the dividend payout influence the behavior of the investors regarding investment in the different stocks.