Document Type : Original Research Paper


Department of Management Sciences, Jinnah Institute of Informatics and Commerce, Islamabad, Pakistan.


This paper divulges the long term relationship among earning, investment and dividends from 2000 to 2011. Empirical evidence was collected to explore the Modigliani and miller theory of dividend irrelevance. Data was collected from all the sectors but it was ensured that firms did not have negative data of earnings as it is earnings which are either transformed into investment or dividends. Multivariate and bivariate cointegration is used to examine the data. Johansen and Juselius multivariate cointegration disclosed the presence of long term relationship among earning, investment and dividends. The traditional view regarding the dividend irrelevance theorem is rejected by this research and results show that dividend and investment are dependent on each other.