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Factors influencing dividend decisions of Indian construction, housing and real estate companies: An empirical panel data analysis

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  • Rakesh Kumar Sharma

Abstract

This paper makes an attempt to identify the factors influencing dividend policy by analysing data of 125 companies enngaged in housing, construction and real estate business in India. These companies are selected which have paid dividend throughout the study period. Most of these companies are listed with either Bombay Stock Exchange or National Stock Exchange. This paper applies three alternative methods to verify and validate the results obtained from each other method. These methods are fully modified ordinary least squares (OLS), dynamic OLS and generalized methods of moments (GMM). Empirical findings of this research article depict that firm size, leverage and liquidity are significantly affecting dividend payout ratios and these variables have a negative relationship with the dividend payout ratio of the selected real estate firms. The results indicate that firm risk as measured through price–earnings ratio (P/E ratio) has a positive association with dividend payout ratio of selected real estate firms. Lagged dividend payout ratio used in the GMM test as an exogenous variable is showing positive significant association with dividend payout ratio. A firm's growth shows a negative relationship with dividend payout ratio using GMM technique. The present study shall be useful to different stakeholders of real estate companies. Various significant determinants as identified can be used by management for designing optimum dividend policy and providing maximum benefits to existing shareholders. Similarly existing as well as prospective shareholders may predict the future payment of dividend and accordingly they may take investment decisions in these firms, as the future fund's requirement of a firm depends upon dividend payment and retention ratio.

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  • Rakesh Kumar Sharma, 2021. "Factors influencing dividend decisions of Indian construction, housing and real estate companies: An empirical panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5666-5683, October.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:4:p:5666-5683
    DOI: 10.1002/ijfe.2087
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    2. Anshu Agrawal, 2021. "Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions," JRFM, MDPI, vol. 14(9), pages 1-38, September.
    3. Ana Escribano & Francisco Jareño & Jose Ángel Cano, 2023. "Study of the leading European construction companies using risk factor models," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3386-3402, July.

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