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Dividend Behaviour of Indian Companies Under Monetary Policy Restrictions


  • Bhat Ramesh
  • Pandey I M


In this study we examine the dividend behaviour of Indian companies. We use GMM estimator, which is the most suitable methodology in a dynamic setting. Our results show that the Indian firms have lower target ratios and higher adjustment factors. The most significant result is that the restricted monetary policies have significant influence on the dividend behaviour of Indian firms, causing about 5-6 percent reduction in the payout ratios. The significance of macro economic policy variable suggest that monetary policy restrictions do have impact on cost of raising funds, and the information asymmetry between lenders and borrowers increases that forces companies to reduce their dividend payout.

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  • Bhat Ramesh & Pandey I M, 2004. "Dividend Behaviour of Indian Companies Under Monetary Policy Restrictions," IIMA Working Papers WP2004-05-07, Indian Institute of Management Ahmedabad, Research and Publication Department.
  • Handle: RePEc:iim:iimawp:wp01819

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    References listed on IDEAS

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    9. Bhat Ramesh & Pandey I M, 1993. "Dividend Decision: A Study of Managers Perceptions," IIMA Working Papers WP1993-02-01_01158, Indian Institute of Management Ahmedabad, Research and Publication Department.
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    11. Pruitt, Stephen W & Gitman, Lawrence J, 1991. "The Interactions between the Investment, Financing, and Dividend Decisions of Major U.S. Firms," The Financial Review, Eastern Finance Association, vol. 26(3), pages 409-430, August.
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    Cited by:

    1. Darakhshan Younis & Attiya Yasmin Javid, 2014. "Market Imperfections and Dividend Policy Decisions of Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:99, Pakistan Institute of Development Economics.
    2. Al-Malkawi, Husam-Aldin Nizar & Bhatti, M. Ishaq & Magableh, Sohail I., 2014. "On the dividend smoothing, signaling and the global financial crisis," Economic Modelling, Elsevier, vol. 42(C), pages 159-165.
    3. Muhammad Shahzad Ashraf & Hasan M. Mohsin, 2012. "Monetary Policy Restriction and Dividend Behaviour of Pakistani Firms: An Empirical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 683-693.
    4. Zubaida Batool & Attiya Yasmin Javid, 2014. "Dividend Policy and Role of Corporate Governance in Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:109, Pakistan Institute of Development Economics.
    5. Khamis Hamed Al-Yahyaee & Toan Pham & Terry Walter, 2010. "Dividend stability in a unique environment," Managerial Finance, Emerald Group Publishing, vol. 36(10), pages 903-916, August.

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