An Impact of Default Risk and Promoters’ Holding on the Dividend Policy in the Firms in India: Evidence using Panel Data
Open Access
- 30 January 2022
- journal article
- Published by Blue Eyes Intelligence Engineering and Sciences Engineering and Sciences Publication - BEIESP in International Journal of Management and Humanities
- Vol. 8 (6), 12-18
- https://doi.org/10.35940/ijmh.f14200.018622
Abstract
Dividends, as a policy is still a matter of debate. This situation is due to both, lack of consensus in the literature and self-evolution of corporate finance worldwide. Therefore, this study is an attempt to provide insights of the contemporary dividend policy and its driving forces. We collect the panel data from 78 non-financial Indian firms from BSE-100 (BSE-100 is a leading index of Indian companies by Bombay Stock Exchange) from 2015-2019. We decide to test how dividends are driven by default risk, ownership concentration (OC) and profitability of the firms. Profitability is used as moderator to the association of default risk with the dividends. We get startling evidence that OC and profitability do not influence the dividends policy in the firms in India. Default risk negatively impacts the dividends. However, the absolute value of the coefficient is too small and hence can be ignored. Furthermore, we find evidence that dividends are consistent despite the situation of profitability and OC. This finding is one of the main contributions of the study. We recommend to have differential voting rights (DVR) shares to cater to varying aspirations of different investors. Empirical evidence of findings of the study would be an eye-opener to the managers, which is one of the major implications of the current study. Additionally, change of the policies on the DVR shares is another major implication of the study.Keywords
This publication has 41 references indexed in Scilit:
- Ownership concentration and dividend policy in JapanManagerial Finance, 2011
- Dividend Stickiness and Strategic PoolingThe Review of Financial Studies, 2010
- Dividend behaviour and smoothing new evidence from Jordanian panel dataStudies in Economics and Finance, 2009
- Explanatory factors of bank dividend policy: revisitedManagerial Finance, 2009
- A survey of management views on dividend policy in Iranian firmsInternational Journal of Islamic and Middle Eastern Finance and Management, 2009
- In search of a residual dividend policyReview of Financial Economics, 2006
- Ownership Concentration, Agency Conflicts, and Dividend Policy in JapanSSRN Electronic Journal, 2006
- Market evidence on the opaqueness of banking firms’ assetsJournal of Financial Economics, 2004
- Rating Banks: Risk and Uncertainty in an Opaque IndustryAmerican Economic Review, 2002
- Corporate Disclosure Practices, Institutional Investors, and Stock Return VolatilityJournal of Accounting Research, 2000