The Impact of Financial Leverage and Earnings on Dividend Policy:A Study of Banking Sector in India

Banking is one of the important support services for business but today it has become an industry in itself and investors look upon it as a profitable sector. Indian banking industry is thought to become 5^th largest banking industry of the world by 2020. Now it becomes important to know what this sector is paying back to its equity investors in the form of dividends. As far as dividend is concerned, it has always been a puzzle in financial management and there are number of factors that influence the dividend payment. This paper is an attempt to find out the relation of dividend with other factors which can affect it. Researchers have tried to know the impact of earning, financial leverage and book value of shares as a major component on the dividend policy of banks in India. The study is based on the data for 33 banks in total for a period of 12 years. Both the nationalized and private banks are considered for the study. The various statistical tools have been applied using SPSS.