TITLE:
Solving the Puzzle of Relative Importance of Dividends and Retained Earnings in Stock Valuation: A Case of Karachi Stock Exchange
AUTHORS:
Asma Tariq, Mina Kharal, Muhammad Abrar, Alishba Ahkam, Muhammad Sarfraz Khan
KEYWORDS:
Dividends, Retained Earnings, Stock Valuation, Karachi Stock Exchange
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.8,
October
22,
2014
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.