The Lahore Journal
of Business

The Lahore Journal
of Business

Lahore Journal of Business

(HEC recognized journal in “Y” category)

The Lahore Journal of Business is aimed at providing a specialized forum for dissemination of qualitative and quantitative research in various areas of business administration. The LJB invites researchers, policy makers and analysts to submit original theoretical and empirical papers that explore and contribute to the understanding of various areas in the business domain. The Journal aims at bringing together state-of-art research findings, particularly from emerging markets, in various business disciplines including (but not limited to) accounting, banking, management, marketing, finance, investments, human resource management and organizational behavior.

Ijaz Hussain

This paper applies a probit model to a panel of 319 firms listed on the Karachi Stock Exchange over the period 1999–2010, and finds that changes in inflation have a statistically significant, positive impact on the probability of paying cash and bonus dividends. Inflation induces firms to revalue their assets, which raises their distributable revaluation surplus. This, in turn, serves as a good buffer when distributing cash and bonus dividends, especially during periods of high inflation and the low profitability of firms during a recession. Bonus dividend distribution becomes relatively more attractive for firms in such a scenario because these enhance debt capacity (collateral) through the revaluation of assets and reduce the debt-equity ratio. We also highlight other factors that contribute to the probability of paying cash and bonus dividends.