Dividend Policy

An Empirical Analysis of Dividend Payout Policy
Indian Corporate

ABSTRACT

In the present paper an attempt has been made to assess the dividend payout policies of Indian Companies. For the purpose of study BSE Sensex -30 companies have been selected as sample for the study. To study impact of profitability, liquidity and size of business on dividend payout regression analysis were carried out. An attempt has also been made to calculate estimated dividend payout based on regression results. The result of the study indicates dividend policies of Indian companies were highly influenced by profitability and liquidity of the firm. The major companies follow conservative dividend policy.

Keywords: Dividend Payout Policy; Indian Capital market.

An Empirical Analysis of Dividend Payout Policy
Indian Corporate

Introduction:
Dividend policy is one of the most controversial subjects in finance. Dividend policy is one of the most important financial policies, not only from the viewpoint of the company, but also from that of the shareholders, the customers, the workers, regulatory bodies and the Government. Finance scholars have engaged in extensive theorizing to explain why companies should pay or not pay dividends.

Lintner, 1956; Brittain, 1964; Modigliani and Miller, 1961; Pettit, 1972; Black and Scholes 1973, Michael, Thaler and Womack, 1995; Dhillon and Johnson, 1994; Amibud and Murgia, 1997; Charitou and Vafeas, 1998, studies has determined on the developed countries, the decision between paying dividend and retaining earnings has been taken seriously by both investors and management, and has been the subject of considerable research by economists in the last four decades.

Financial economists have therefore, acknowledged the after tax earnings of any business firm as an important internal source of investible funds and also a basis for dividend payments to shareholders. The decision to retain, reinvest or pay out after tax earnings in form of

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