This article aims to investigate using regression analysis the pre- and post-impacts of the Pakistan–China Free Trade Agreement (FTA) on profitability, leverage and dividend payouts of firms. The panel data consist of 179 listed non-financial Pakistani firms compiled from the Karachi Stock Exchange for the 2002–14 period. The results demonstrate that due to changes in tariffs, companies that face import and export competition tend to reduce profits, increase leverage and decline giving dividend payouts. On the other hand, companies that have improved efficiency by importing new technology and those that are export-oriented enjoy increased profits and reduced leverage, and are able to increase their dividend disbursements. This study would serve as a reference for financial managers and trade policymakers in their decision-making for their firms and country, respectively.