Dividend Strategy of Indian Manufacturing Companies: An Empirical Assessment

The paper empirically investigates the dividend strategy of a sample of Indian manufacturing firms. Dividend policy is measured by the probability that dividend is paid, and the relative amount of dividends paid. It is found that bigger and mature firms tend to pay higher dividends. We also find significant divergence in dividend policy across firm ownership. More specifically, the possibility of initiating or paying the same dividends in two consecutive years for firms is more likely to happen in an upturn. Dividend payments are significantly and negatively related to leverage, attesting to the fact that high debt is an important constraining factor for firms in paying dividends. In sum, dividend policy of firms depends on firm-level factors as well as business cycle considerations.