Dividend policy in India: new survey evidence

Abstract

Purpose – The purpose of this paper is to survey managers of dividend-paying firms listed on the National Stock Exchange (NSE) in India to learn their views about the factors influencing dividend policy, dividend issues, and explanations for paying cash dividends and repurchasing shares. The authors compare the results to other dividend surveys based on firms in Indonesia, Canada, and the USA. Design/methodology/approach – The authors use questionnaire to gather primary data from a sample of 500 firms listed on the NSE. Findings – The most important determinants of dividends involve earnings (the stability of earnings as well as the level of current and expected future earnings) and the pattern of past dividends. Comparing the overall rankings of the 21 factors by respondents from Indian firms to those of Indonesian, Canadian, and US firms reveals statistically significant correlations. Respondents also perceive that dividend policy affects firm value. Respondents also view maintaining an uninterrupted record of dividends as important. The most highly supported explanations for paying cash dividends concern signaling, the firm life cycle, and catering. Although none of the theories of repurchasing shares is dominant, respondents provide little support for the agency explanation. Research limitations/implications – Although the tests suggest that the sample does not suffer from non-response bias, the findings should be viewed as suggestive rather than definitive because of the relatively low response rate. Originality/value – The paper presents new evidence about dividend policy of Indian firms. To the knowledge, this is the most comprehensive survey of Indian firms to date that captures managerial perceptions on both cash dividends and share repurchases.

What do we know about the dividend puzzle? – A literature survey

“…In another study, Brav et al (2005) also show support for Lintner's behaviour modelespecially, they indicate that one of Lintner's key findings still holds; managers are reluctant to cut dividends and the current level of dividend payments is taken as given unless adverse circumstances are likely to persist. In addition to above surveys conducted in the U.S., a string of studies providing survey evidence in different countries (from both developed and emerging markets), such as Baker et al (2006) in Norway, Baker et al (2008) in Canada, Baker and Powell (2012) in Indonesia, Baker and Kapoor (2015) in India and Baker et al (2018) in Turkey, have all reported general support for Lintner's partial adjustment model. Mookerjee's (1992) research is one of the earliest studies that quantitatively apply the Lintner model to different developing markets.…”

Dividend policy of firms listed on Casablanca Stock Exchange: a panel data analysis

“…For instance, Pruitt and Gitman (1991) investigate major firms in the US and report that dividend policy is largely influenced by the current year's earnings. Other studies confirm this relationship in emerging markets such as Turkey (Adaoglu, 2000), India (Baker and Kapoor, 2015), and MENA (Jabbouri, 2016). H1 There is a positive relationship between dividend payout ratio and current profits.…”

Equity Issuance and Corporate Dividend Policy in Emerging Economy Context

“…The study revealed that a situation with the payment of dividends in the corporate sector in Ukraine is quite indistinctive for more developed and emerging stock markets where payment of dividends is not an exclusion [Baker and Kapoor 2015, Forti and Schiozer 2015, Kadioglu et al 2015, Manneh and Naser 2015, Yaseen et al 2015 Is it possible to explain the mass abandonment of dividends payment with the help of modern theories of dividend policy, that were considered in the LITERATURE REVIEW section?.…”