Journal of Management Research

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Factors Affecting the Likelihood of Paying Dividends


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1 Department of Humanities and Social Sciences, IIT Kharagpur, 721302, West Bengal, India
     

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This paper attempts to identify the factors affecting the likelihood of paying dividends of Indian listed firms during the period 1994-95 to 2012-13. We find that dividend paying firms are larger in size, more profitable, less levered, and more mature than the non-dividend paying firms. The logit regression results suggest that the variables such as market-to-book ratio, financial leverage, business risk and dividend distribution tax have significant negative and variables like firm's maturity, size of the firm, profitability and liquidity have significant positive impact on the likelihood of paying dividends. The results are robust across the periods for Indian firms and consistent with the pecking order, transaction, signaling and firm life cycle theories of dividend.

Keywords

Dividend payout, Logit model, Investment opportunity, Financial leverage, Business risk, JEL Classification: G35, G30.
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  • Factors Affecting the Likelihood of Paying Dividends

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Authors

Nishant B. Labhane
Department of Humanities and Social Sciences, IIT Kharagpur, 721302, West Bengal, India
Jitendra Mahakud
Department of Humanities and Social Sciences, IIT Kharagpur, 721302, West Bengal, India

Abstract


This paper attempts to identify the factors affecting the likelihood of paying dividends of Indian listed firms during the period 1994-95 to 2012-13. We find that dividend paying firms are larger in size, more profitable, less levered, and more mature than the non-dividend paying firms. The logit regression results suggest that the variables such as market-to-book ratio, financial leverage, business risk and dividend distribution tax have significant negative and variables like firm's maturity, size of the firm, profitability and liquidity have significant positive impact on the likelihood of paying dividends. The results are robust across the periods for Indian firms and consistent with the pecking order, transaction, signaling and firm life cycle theories of dividend.

Keywords


Dividend payout, Logit model, Investment opportunity, Financial leverage, Business risk, JEL Classification: G35, G30.

References