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Dividend policy and business groups: Evidence from Indian firms

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  • Manos, Ronny
  • Murinde, Victor
  • Green, Christopher J.

Abstract

We invoke theories of dividend policy and the market failure theory of business groups to investigate the impact of group affiliation on the dividend payment decision (to pay or not to pay?) and payout level decision (how much to pay?). We use a large sample of quoted, non-financial, independent and group-affiliated Indian firms. While we find that the payout ratios of group-affiliated firms are higher than those of independent firms, there is no clear evidence to support the view that this is due to the level of diversification or group size. Overall, we find that although they mitigate market imperfections, business groups remain vulnerable to information problems in the dividend payment decision and the payout level decision.

Suggested Citation

  • Manos, Ronny & Murinde, Victor & Green, Christopher J., 2012. "Dividend policy and business groups: Evidence from Indian firms," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 42-56.
  • Handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:42-56
    DOI: 10.1016/j.iref.2011.05.002
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    References listed on IDEAS

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    Cited by:

    1. Su, Zhong-qin & Fung, Hung-Gay & Huang, Deng-shi & Shen, Chung-Hua, 2014. "Cash dividends, expropriation, and political connections: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 260-272.
    2. Erkan, Asligul & Fainshmidt, Stav & Judge, William Q., 2016. "Variance decomposition of the country, industry, firm, and firm-year effects on dividend policy," International Business Review, Elsevier, vol. 25(6), pages 1309-1320.
    3. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    4. repec:bla:ausecp:v:55:y:2016:i:4:p:386-408 is not listed on IDEAS
    5. repec:bap:journl:170305 is not listed on IDEAS
    6. Bradford, William & Chen, Chao & Zhu, Song, 2013. "Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 445-464.
    7. Rosy Locorotondo & Nico Dewaelheyns & Cynthia Hulle, 2015. "Affiliates’ Bank Debt Policy: Does Parent Firm Nationality Matter?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(5-6), pages 747-776, June.
    8. Cueto, Diego C., 2013. "Substitutability and complementarity of corporate governance mechanisms in Latin America," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 310-325.
    9. repec:eee:reveco:v:49:y:2017:i:c:p:422-436 is not listed on IDEAS

    More about this item

    Keywords

    Dividend policy; Business groups; India;

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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