To pay or not to pay: what matters the most for dividend payments?

Abstract

Purpose The purpose of this paper is to test the stickiness of payout policy across times for Indian firms, by identifying the determinants of dividend payout (for amount of dividends as well as probability of dividends) and examine their predictive consistency through good and bad times, affiliation categories, amid controls for idiosyncratic characteristics. The authors also examine the scantly explored effects of financial constraints on firms’ dividend decisions. Design/methodology/approach The authors use various regression models, i.e. panel, Tobit and logit models; and amid control for firm-specific characteristics throughout the analysis. Findings The authors observe payout levels on average increasing with time for Indian firms. Further, group firms pay higher dividends compared to standalone firms. Firms’ leverage, profitability, non-promoters holdings, growth prospects and dividend event are apparently the important determinants of payout ratio and are mostly, but not always, consistent through times and firms’ categories, for both the amount as well as the likelihood of dividend payments. Financial constraints have an overall negative impact on dividends with significantly varying magnitude across periods of stability, crisis and recovery. Firms’ age and size are positive and significant factors for dividends level decisions in Indian firms, which is consistent with the life-cycle theory. However, inconsistent size and age effect is observed in determining the likelihood of dividend payment. Research limitations/implications This study adds to the growing literature on the changing trends and contributing factors of firms’ dividend payout policy. Originality/value This study provides evidence on predictive consistency of payout policy of firms and its determination with the change in the external economic condition.

Dividend Policy on IPOs Companies in Indonesia: A Life Cycle Theory Test

“…Thus, companies with greater AGE have higher propensity to pay dividends, which is 1.3120 times higher than those with smaller AGE. It is in accordance with the result of Ranajee et al [8] which proves that older companies have higher propensity to pay dividends; (4) the estimated value of SIZE variable coefficients toward PPD is 0.3316, the standard error value is 0.1685, the probability is 0.0491, and the odds ratio is 1.3935. Referring to the 0.05 significance level, it can be concluded that there is strong empirical evidence to accept hypothesis 4.1.…”

“…The support to the life cycle theory is shown by significant positive impacts of company size and profitability on the tendency to pay dividends and significant negative impact of investment opportunities on dividend payments. Third, the study of Ranajee, Pathak, & Saxena [8] on all companies listed on the National Stock Exchange and the Bombay Stock Exchange from April 2001 to March 2016, except for financial, utilities, and government companies, concludes that age and size of company are significant positive factors to determine the dividend rate decisions, which is in line with the life cycle theory.…”

“…Meanwhile, in line with the life cycle theory, Wang, Ke, Liu, & Huang [31] in Taiwan show that younger companies with high growth opportunities and limited profitability tend to distribute stock dividends rather than cash dividends. In addition, the researches of Thirumagal & Vasantha [23] and Ranajee et al [8] in India prove that company age has a positive significant impact on dividend policy. Thus, the hypotheses that can be proposed are:…”

Determinants of Dividend Policy of Real Estate, Property, and Building Construction Companies Listed in IDX with Unbalanced Panel Data Approach

“…The older a company, the better the ability to generate higher profits due to better business experience. Older companies tend to set higher dividend rate as they are capable of making greater profits (Badu, 2019;Ranajee et al, 2018). Thus, the following hypothesis was formulated: H10: Company Size has a positive and significant influence on Dividend Policy.…”

Corporate Governance and Dividend Policy in the Banking Sector on the Indonesian Stock Exchange

“…Many researchers have investigated investors to learn their perspectives on dividends (For example, Baker & Jabbouri, 2017;Baker, Kapoor, & Jabbouri, 2018). Several studies even investigated specific company attributes as determinants of dividend policy (For example, Ranajee, Pathak, & Saxena, 2018;Singla & Samanta, 2019;Budagaga, 2020). Other studies tested a model life cycle empirically to understand why companies pay dividends.…”