Dividend Payout Ration - Case Study
International Research Journal of Finance and Economics ISSN 1450-2887 Issue 15 (2008) © EuroJournals Publishing, Inc. 2008 http://www.eurojournals.com/finance.htm
Determinants of Dividend Payout Ratios-A Study of Indian Information Technology Sector
Kanwal Anil Jaypee Business School, Noida, India Sujata Kapoor Institute of Management Studies, Ghaziabad, India Abstract Profitability has always been considered as a primary indicator of dividend payout ratio. There are numerous other factors other than profitability also that affect dividend decisions of an organization namely cash flows, corporate tax, sales growth and market to book value ratio. Available literature suggests that dividend payout ratio is positively related to profits, cash flows and it has inverse relationship with corporate taxes, sales growth and market to book value ratio. This paper is an attempt to empirically analyze the determinants of dividend payout ratio of Indian Information Technology sector. The paper also focuses on identifying whether various factors available as per literature influence dividend payout ratio in IT sector in India in existing scenario or not. Statistical techniques of correlation and regression have been used to explore the relationship between key variables. Thus, the main theme of this study is to identify the various factors that influence the dividend payout policy decisions of IT firms in India. Keywords: Dividends, determinants, IT sector
1. Inroduction
Dividend payout has been an issue of interest in financial literature. Academicians & researchers have developed many theoretical models describing the factors that managers should consider when making dividend policy decisions. By dividend policy, we mean the payout policy that managers follow in deciding the size and pattern of cash distribution to shareholders over time. In seminal paper, Miller and Modigliani (M&M) (1961) argue that given perfect capital markets, the dividend decision does not
Determinants of Dividend Payout Ratios-A Study of Indian Information Technology Sector
Kanwal Anil Jaypee Business School, Noida, India Sujata Kapoor Institute of Management Studies, Ghaziabad, India Abstract Profitability has always been considered as a primary indicator of dividend payout ratio. There are numerous other factors other than profitability also that affect dividend decisions of an organization namely cash flows, corporate tax, sales growth and market to book value ratio. Available literature suggests that dividend payout ratio is positively related to profits, cash flows and it has inverse relationship with corporate taxes, sales growth and market to book value ratio. This paper is an attempt to empirically analyze the determinants of dividend payout ratio of Indian Information Technology sector. The paper also focuses on identifying whether various factors available as per literature influence dividend payout ratio in IT sector in India in existing scenario or not. Statistical techniques of correlation and regression have been used to explore the relationship between key variables. Thus, the main theme of this study is to identify the various factors that influence the dividend payout policy decisions of IT firms in India. Keywords: Dividends, determinants, IT sector
1. Inroduction
Dividend payout has been an issue of interest in financial literature. Academicians & researchers have developed many theoretical models describing the factors that managers should consider when making dividend policy decisions. By dividend policy, we mean the payout policy that managers follow in deciding the size and pattern of cash distribution to shareholders over time. In seminal paper, Miller and Modigliani (M&M) (1961) argue that given perfect capital markets, the dividend decision does not
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