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Impact of financial distress on the dividend policy of banks in India: evidence using panel data

Author

Listed:
  • Aashi Rawal

    (Symbiosis Institute of Business Management Pune, Symbiosis International (Deemed) University)

  • Santosh Gopalkrishnan

    (Symbiosis Institute of Business Management Pune, Symbiosis International (Deemed) University)

Abstract

The study primarily aims to examine the impact of financial distress on the dividend distribution policy of banks operating in India. Panel data analysis was performed using a static model to investigate the impact of distress on the bank’s dividend policy. The Z-score developed by Altman measures a bank’s financial distress (a high Z-score indicates the absence of financial distress). Data from 31 out of 34 banks operating in India between 2016 and 2020 has been used. The debt/equity ratio is used as the moderator. The sales log is used as the control variable. A linear connection exists between financial distress and dividends. Furthermore, debt/equity ratio significantly moderates the association of financial distress with dividend policy. The findings contribute to formulating a long-term dividend policy by drawing attention to the distressing situation in the banking sector, focusing on ensuring the banks’ financial viability. Thereby, the findings are novel and hold significant worth in improving the current understanding of the subject.

Suggested Citation

  • Aashi Rawal & Santosh Gopalkrishnan, 2024. "Impact of financial distress on the dividend policy of banks in India: evidence using panel data," Future Business Journal, Springer, vol. 10(1), pages 1-11, December.
    • Handle: RePEc:spr:futbus:v:10:y:2024:i:1:d:10.1186_s43093-024-00310-y
    DOI: 10.1186/s43093-024-00310-y
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    More about this item

    Keywords

    Financial distress; Dividend payout; Debt/equity ratio; Panel data analysis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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