This paper examines the impact of leverage on dividend payment pattern of Pakistani manufacturing firms. 44 companies from five different sectors having regular dividend payment history are included in sample. The annual data for these companies from 2006 to 2011 is used in the study. Simple OLS technique for analysis is used to derive the results of the study. The findings show that leverage has significant negative impact on dividend payment pattern of sampled firms. Dummies variable used to identify the sector specific impact of leverage on dividend payment reveal that affect of leverage on dividend distribution in sugar and textile industry behave differently as compare to other sectors. The results of study help the corporate management to better decide the level of leverage and dividend policy by highlighting the interaction between leverage and dividend payment pattern. That in turn ensures the equity market stability.
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