Impact of Information Environment on Dividend and Moderating Role of Regulatory Quality

Purpose: Information asymmetry arises between managers and stakeholders due to unequal information and regulatory environment can influence this asymmetry. Information environment comprises of firm level factors that generate information; is important for dividend policy. This study aims to examine the moderating role of regulatory environment between information environment and dividend yield. Design/Methodology/Approach: This study is grounded in signaling theory. Firm level data (171 firms) and two WGI indicators regulatory quality and rule of law of Pakistan are taken from Year 2000- 2022. Data is analyzed using two step Systems GMM technique after preliminary analysis. Findings: Results show that information environment impacts dividend yield and regulatory environment moderate’s this relationship in Pakistani firms indicating the importance of regulatory environment for informed dividend decisions aligning with UN’s SDG 8’s goal of economic development and SDG 16’s target of institutional transparency. Implications/Originality/Value: Findings implicate that managers and investors should recognize dividend as a quality signal for Pakistani firms affected by information and regulatory environment and policy makers should consider the significance of regulations in the corporate sector. This is the first study to examine the role of regulatory environment between information environment and dividend yield in Pakistan.