Impact of Ownership Structure on Dividend Yields: A Neural Network Approach

Abstract

There is a general perception that corporate performance in emerging markets is inclined towards few key powerful stakeholder groups ignoring issues of corporate governance. Big players like insurance companies, financial institutions, and corporate bodies etc. which have substantial shares in companies may influence the dividend yields. The study aims at examining the link between different ownership structures and dividend yield .The paper uses panel data approach for 100 Indian firms for a period of six years from 2005 to 2010. Dividend yield is taken as output variable and percentage share of important shareholder groups are taken as input variables to build Multilayer Perceptron (M.L.P.) using Neural Networks. The most influencing category of shareholder groups are selected by sensitivity analysis. We found that the involvement of individual investors, non promoters & corporate bodies in the firms’ capital structure negatively impacts the dividend yields. However, insurance companies banks and financial institutions ownership incites to increase in dividend yield. Furthermore the results also show that foreign institutional investor doesn’t seem to impact the dividend yields significantly for our study.

Keywords: Ownership Structure, Dividend Yield, Corporate Governance, Multi layer Perceptron, Neural Networks, Sensitivity analysis