Behaviour of Dividend Decision Determinants: A Comparative Study of Select Indian Public and Private Manufacturing Companies

Authors

  • Dr. Jasvir S. Sura Associate Professor, Department of Management, Chaudhary Ranbir Singh University, Jind (Haryana), 126102, India
  • Gourav Senior Research Fellow, Department of Management, Chaudhary Ranbir Singh University, Jind (Haryana), 126102, India.
  • Dr. Anju Lather Assistant Professor, Department of Commerce, Chottu Ram Kisan College, Jind (Haryana), 126102, India
  • Kavita Sandhu Senior Research Fellow, Department of Management, Chaudhary Ranbir Singh University, Jind (Haryana), 126102, India.

Keywords:

Dividend Policy, Payout Ratio, Indian Manufacturing firms, Dividend Determinants, Dividend Behaviour

Abstract

Developing an optimal dividend policy is a critical area for management because it allocates a firm's surplus profit distribution among shareholders as dividends or can be retained in the business for re-investment. The present study examines the trend and pattern of dividend decision variables of Indian manufacturing companies over the period 2000-01 to 2019-20. The analysis uses descriptive statistics and an independent sample t-test, revealing that highly profitable, liquid, and larger firms have higher dividend payout ratios. In contrast, firms with high capital expenditure in fixed assets generally distribute lower dividends to their shareholders. The findings advocated that the dividend policy decision of Indian manufacturing firms is primarily influenced by variables like the firm's size, profitability, liquidity, lagged dividend, and cash-flow position. The study results are also consistent with the life cycle theory and signaling theory of dividend policy.

References

Abor, J. (2010). Investment Opportunities, Corporate Finance, and Dividend Payout Policy: Evidence from Emerging Markets. Studies in Economics and Finance, 27(3), 180-194.

Adelegan, O. (2002). The pecking order hypothesis and corporate dividend payout: Nigerian evidence. African Review of Money Finance and Banking, 75-94.

Afza, T., & Mirza, H. H. (2011). Do mature companies pay more dividends? Evidence from Pakistani stock market. Mediterranean Journal of Social Sciences, 2(2), 152-161.

Al‐Ajmi, J., & Hussain, H. A. (2011). Corporate dividends decisions: evidence from Saudi Arabia. The Journal of Risk Finance.

Al-Kuwari, D. (2009). Determinants of the dividend policy of companies listed on emerging stock exchanges: the case of the Gulf Cooperation Council (GCC) countries. Global Economy & Finance Journal, 2(2), 38-63.

Al‐Malkawi, H. A. N. (2007). Determinants of corporate dividend policy in Jordan: an application of the Tobit model. Journal of Economic and Administrative Sciences.

Al‐Najjar, B. (2009). Dividend behaviour and smoothing new evidence from Jordanian panel data. Studies in Economics and Finance.

Amidu, M., &Abor, J. (2006). Determinants of dividend payout ratios in Ghana. The journal of risk finance, 7(2), 136-145.

Anand, M. (2004). Factors influencing dividend policy decisions of corporate India. ICFAI Journal of Applied Finance, 10(2), 5-16.

Anastassiou, T. A. (2007). A dividend function for Greek manufacturing. Managerial Finance, 33(5), 344-347.

Anil, K., & Kapoor, S. (2008). Relevance of signaling and smoothing approaches to dividend: a study of Indian IT sector. Asia Pacific Business Review, 4(4), 104-123.

Arif, A., &Akbar, F. (2013). Determinants of dividend policy: a sectoral analysis from Pakistan. International Journal of Business and Behavioral Sciences, 3(9), 16-33.

Baker, H. K.&Kapoor, S. (2015). Dividend Policy in India: New Survey Evidence. Managerial Finance, 41(2), 182-204.

Baker, H. K., & Weigand, R. (2015). Corporate dividend policy revisited. Managerial Finance.

Baker, H. K., Farrelly, G. E., & Edelman, R. B. (1985). A survey of management views on dividend policy. Financial management, 78-84.

Baker, H. K., Veit, E. T. & Powell, G. E. (2001). Factors Influencing Dividend Policy Decisions of Nasdaq Firms. Financial Review, 36(3), 19-38.

Black, F (1976). The Dividend Puzzle. Journal of Portfolio Management, 5-8.

Boţoc, C., & Pirtea, M. (2014). Dividend payout-policy drivers: Evidence from emerging countries. Emerging Markets Finance and Trade, 50(sup4), 95-112.

Brittain, J. A. (1966). Corporate dividend policy. Brookings institution.

Chowdhury, R. H., Maung, M., & Zhang, J. (2014). Information content of dividends: a case of an emerging financial market. Studies in Economics and Finance.

Das, S. (2017). Firm characteristics and dividend policy in India. Transnational Corporations Review, 9(3), 190-200.

Denis, D. J., & Osobov, I. (2008). Why do firms pay dividends? International evidence on the determinants of dividend policy. Journal of Financial economics, 89(1), 62-82.

Eriotis, N. (2005). The effect of distributed earnings and size of the firm to its dividend policy: some Greek data. International Business & Economics Research Journal (IBER), 4(1).

Fama, E. F., & French, K. R. (2001). Disappearing dividends: changing firm characteristics or lower propensity to pay?.Journal of Financial economics, 60(1), 3-43.

George, R., &Kumudha, A. (2006). A study on dividend policy of Hindustan Construction Co. Ltd. with special reference to Lintner model. Synergy, Jan, 4(1), 86-96.

Hussainey, K., Mgbame, C. O., & Chijoke‐Mgbame, A. M. (2011). Dividend policy and share price volatility: UK evidence. The Journal of risk finance.

Jabbouri, I. (2016). Determinants of corporate dividend policy in emerging markets: Evidence from MENA stock markets. Research in International Business and Finance, 37, 283-298.

Kapoor, S., Mishra, A., & Anil, K. (2010). Dividend policy determinants of Indian services sector: a factorial analysis. Paradigm, 14(1), 24-41.

Khan, M. N., & Shamim, M. (2017). A sectoral analysis of dividend payment behavior: Evidence from Karachi Stock Exchange. SAGE Open, 7(1).

Kumar, B. &Sujit, K. S. (2018). Determinants of Dividends among Indian Firms—an Empirical Study. Cogent Economics & Finance, 6(1), 1423895.

Kumar, S. (2011). Determinants of corporate dividend policy. Asia Pacific Business Review, 7(2), 25-36.

Kumar, S., & Ranjani, K. S. (2018). Dividend behaviour of Indian-listed manufacturing and service sector firms. Global Business Review, 20(1), 179-193.

Labhane & Mahakud. (2016). Determinants of dividend policy of Indian companies: A panel data analysis. Paradigm, 20(1), 36-55.

Labhane. (2017). Disappearing and reappearing dividends in emerging markets: Evidence from Indian companies. Journal of Asia-Pacific Business, 18(1), 46-80.

Lintner, J. (1956). Distribution of Income of Corporation among Dividends, Retained Earnings, and Taxes, American Economic Review, 46: 97-113.

Mahakud, J. (2005). Shareholding patterns and dividend policy: Evidence from Indian corporate sector. The ICFAI Journal of Applied Finance, 11(9), 40-54.

Miller, M. & Modigliani, F (1961). Dividend Policy,Growth and the Valuation of Shares. Journal of Business, (34), 411-433.

Mishra, C. S., & Narender, V. (1996). Dividend policy of SOEs in India: An analysis. Finance India, 10(3), 633-645.

Myers, S. C. (1984). Finance theory and financial strategy. Interfaces, 14(1), 126-137.

Patra, T., Poshakwale, S., &Ow-Yong, K. (2012). Determinants of corporate dividend policy in Greece. Applied Financial Economics, 22(13), 1079-1087.

Pourheydari, O. (2009). A survey of management views on dividend policy in Iranian firms. International Journal of Islamic and Middle Eastern Finance and Management.

Samet, M., & Jarboui, A. (2017). Corporate social responsibility and payout decisions. Managerial Finance.

Sura, Pal, & Bodla (2006). Factors influencing dividend policy decisions in banking sector: an Indian evidence. Amity Business Review, 7(2), 64-76.

Thakur, B. P. S., & Kannadhasan, M. (2018). Determinants of dividend payout of Indian manufacturing companies: A quantile regression approach. Journal of Indian Business Research.

Tripathy, N. P. (1999). Stock Market Efficiency-Testing of Lintner's Model of Dividend Behaviour in Sensex Firms of India. Vision, 3(2), 47-50.

Truong, T. & Heaney, R. (2007). Largest Shareholder and Dividend Policy Around the World. The Quarterly Review of Economics and Finance, 47(5), 667-687.

Yarram, S. R. (2015). Corporate governance ratings and the dividend payout decisions of Australian corporate firms. International Journal of Managerial Finance.

Yusof, Y., & Ismail, S. (2016). Determinants of dividend policy of public listed companies in Malaysia. Review of International Business and Strategy, 26(1), 88-99.

Downloads

Published

27-03-2022

How to Cite

Dr. Jasvir S. Sura, Gourav, Dr. Anju Lather, & Kavita Sandhu. (2022). Behaviour of Dividend Decision Determinants: A Comparative Study of Select Indian Public and Private Manufacturing Companies. International Journal for Research Publication and Seminar, 13(1), 277–309. Retrieved from https://jrps.shodhsagar.com/index.php/j/article/view/1430

Issue

Vol. 13 No. 1 (2022): Volume 13 | Issue 1 | 2022

Section

Articles

License

Copyright (c) 2022 International Journal for Research Publication and Seminar

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Re-users must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. This license allows for redistribution, commercial and non-commercial, as long as the original work is properly credited.