Article

Factors Influencing Dividend Policy Decisions of Corporate India

12/2004;

ABSTRACT The present study analyses the results 2001 survey of 81 CFOs of the bt-500 companies and her most valuable PSUs in India to find out the determinants of the dividend policy decisions of the corporate India. It uses factor analytic framework on the CFOs' responses to capture the determinants of dividend policy of corporate India. Most of the firms have target dividend payout ratio and dividend changes follow shift in the long-term sustainable earnings. The findings on dividend policy are in agreement with Lintner's study on dividend policy. The dividend policy is used as signaling mechanism to convey information on the present and future prospects of the firm and thus affects its market value. The dividend policy is designed after taking into consideration the investors' preference for dividends and clientele effect.

0 Bookmarks
 · 
589 Views
  • [Show abstract] [Hide abstract]
    ABSTRACT: Purpose – The purpose of this paper is to investigate the views of chief financial officers (CFOs) of Iranian firms listed on the Tehran Stock Exchange about the factors influencing dividend policy in 2006. The paper aims to update and extend previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms. Design/methodology/approach – Survey instruments were used to identify the factors that CFOs consider in formulating dividend policy, based on both theoretical and empirical works on dividends, to identify the factors that are most important in dividend policy of firms. Findings – The findings show that the most important determinants of a firm's dividend policies are the stability of cash flow, the availability of profitable investment opportunities, and stability of profitability. Also, industry type appeared to influence the importance that respondents placed on one determinant of dividend policy. Research limitations/implications – It is likely that the firms that did not respond on time may show a non-response bias. Despite lacking normal precautionary steps to increase the response rate, non-response bias may affect the findings. Another limitation of the survey methodology was that it measures beliefs and not necessarily actions. Therefore, caution should be taken in generalizing the findings. Practical implications – The findings have implications for CFOs in formulating dividend policy. Originality/value – The paper updates and extends previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms.
    International Journal of Islamic and Middle Eastern Finance and Management 01/2009; 2(April):20-31.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: We provide here a study of Pakistani Firms registered on the Karachi Stock Markets. We have examined many determinant variables of the dividend policy to shed light on the dividend trends of firms in Pakistan as an emerging market. Our sample is comprised of 108 companies that have been listed on Karachi stock exchange during 1999-2004. The starting point in our research has been an observation that most of the Pakistani firms were reluctant in dividend payments. Mostly, firms either did not pay dividends or their dividend per share ranged between 0 - 2.5 Rupees per share. We find that the non-financial sector has higher average dividend payout than the financial sector. Sector wise analysis indicates that Oil & Gas Exploration, Oil & Gas Marketing and Power Generation & Distribution Sectors have higher average dividend payments. We find evidence that former dividends play a major role in determining current dividends. For the whole sample, we find that firms with greater profitability have higher dividend payouts. We also find that investment opportunities, liquidity and leverage are negatively related to dividend payout for the whole sample. We conclude from the research that when non-financial firms invest more in fixed assets their dividend payout is negatively affected by that. We find also that larger financial firms pay larger amount of dividends. But, when these firms have investment opportunities they retain profits.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Dividend policy is widely researched topic in the field of finance but still it remains a mystery to decide whether dividend policy affects the Stock Prices or not. This paper is an attempt to explain the effect of dividend policy on Stock Prices after controlling the variables like Earnings per Share, Profit after Tax and Return on Equity. A sample of 55 companies listed at KSE-100 Index is selected for the period of 2001-2010. Fixed and random effect models are applied on panel data to determine the relation between dividend policy and stock prices. Results indicate that Dividend Yield, Earnings per Share, Return on Equity and Profit after Tax are positively related to stock prices while Retention Ratio have negative relation with Stock Prices and significantly explains the variations in the stock market prices. These results further elaborates dividend policy is important as it provides signal about the success of the company.

Full-text

Download
17 Downloads
Available from