Impact of Ownership Structure on Dividend Smoothing : A Comparison of Family and Non-Family Firms in Pakistan

In this paper, we use unique features of Pakistan's corporate environment to test information asymmetry and agency theories in explaining dividend smoothing behaviour of firms. Based on a sample of 150 non-financial firms listed at the Karachi Stock Exchange over the period of 1999 to 2012, we find evidence that the degree of dividend smoothing in family firms is lower than the degree of dividend smoothing in non-family firms. Our findings are more in line with the implications of information asymmetry theory. Moreover, our findings suggest that firms in Pakistan follow more flexible dividend policies as compared to developed markets, despite the fact that Pakistan is in classical tax system