Safdar Hussain Tahir, Hazoor Muhammad Sabir, Said Shah


The current study attempts to investigate debt and dividendpolicies under the umbrella of capital structure’s theories in bothorganizational types i.e. family owned business (FOB) and non-familyowned business (NFOB). Two threshold points of ownership structure(25% & 50%) were used to distinguishing FOB from NFOB. A sampleof 280 listed firms at the KSE was collected for the period 2002-13.Generalized Method of Moments (GMM) was applied on paneldata to estimate the coefficients of variables. The empirical resultsindicated the weak application of pecking order theory and higherpayout ratio in family firms comparatively. The study providedexplanation regarding speedier rebalancing the target capitalstructure of family firms due to easier access to debt and long termpresence of the family in the firm. However, FOBs smooth dividends tolesser extent than their counterpart NFOBs indicate lower agencyand information asymmetry problems in them. SECP as well as stockexchanges are advised to bring required changes in corporate lawsto ensure lucid and verifiable disclosure regarding dividend policyin their reports, prospectus and websites etc

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