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Determinants of Dividend Policy of Indian Companies

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  • Nishant B. Labhane
  • Jitendra Mahakud

Abstract

This article analyzes the trends and the determinants of the dividend policy of Indian companies that were continuously paying dividend during the whole period study that is from 1994–1995 to 2012–2013. We have used the static panel data models to carry out this analysis. From the trend analysis we find that larger, more profitable, more mature and highly liquid firms have higher dividend payout ratio, whereas the firms with high investment opportunity, financial leverage and business risk have lower dividend payout ratio. The findings from the panel data analysis suggest that investment opportunity, financial leverage, size of the company, business risk, firm life cycle, profitability, tax and liquidity are the major determinants of the dividend policy for Indian companies. These results were robust across the period also. The findings are consistent with the pecking order, transaction cost, signalling and firm life cycle theories of the dividend policy.

Suggested Citation

  • Nishant B. Labhane & Jitendra Mahakud, 2016. "Determinants of Dividend Policy of Indian Companies," Paradigm, , vol. 20(1), pages 36-55, June.
    • Handle: RePEc:sae:padigm:v:20:y:2016:i:1:p:36-55
    DOI: 10.1177/0971890716637698
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    2. Nor Anis Shafai & Annuar Md. Nassir & Fakarudin Kamarudin & Norhuda Abdul Rahim & Nor Hayati Ahmad, 2019. "Dynamic Panel Model of Dividend Policies: Malaysian Perspective," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(3), September.
    3. Bashir Zahid & Rafique Zulqurnain Zeeshan & Toor Kashif Naseer, 2022. "How do dynamic financing decisions explain the behavior of dividend payout policies?: An Empirical Study of Listed Pakistani Manufacturing Firms," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 18(1), pages 1-15, March.
    4. Ujjayini Roy & Indrani Chakraborty, 2023. "Market concentration, agency cost and firm performance: a case study on Indian corporate firms," Economic Change and Restructuring, Springer, vol. 56(4), pages 2645-2693, August.

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