Factors Influencing Dividend Policy Decisions of Corporate India
ICFAI Journal of Applied Finance, Vol. 10, No. 2, pp. 5-16. February 2004
12 Pages Posted: 7 Dec 2004
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.
Keywords: Dividend policy, payout policy, India
JEL Classification: G35
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