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Abstract

This article analyzes the trends and the determinants of the dividend policy of Indian companies that were continuously paying dividend during the whole period study that is from 1994–1995 to 2012–2013. We have used the static panel data models to carry out this analysis. From the trend analysis we find that larger, more profitable, more mature and highly liquid firms have higher dividend payout ratio, whereas the firms with high investment opportunity, financial leverage and business risk have lower dividend payout ratio. The findings from the panel data analysis suggest that investment opportunity, financial leverage, size of the company, business risk, firm life cycle, profitability, tax and liquidity are the major determinants of the dividend policy for Indian companies. These results were robust across the period also. The findings are consistent with the pecking order, transaction cost, signalling and firm life cycle theories of the dividend policy.

Keywords

Dividends dividend policy dividend payout ratio dividend yield dividend policy theory

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