Abstract
Whether dividend distributions affect the wealth of the shareholders or not has been the central point of numerous conflicting arguments and theories in finance. This paper makes an attempt to find empirical evidence, in the Indian context, on the association between dividend distribution s and economic welfare of the owners of a firm. Using a sample of 533 firms, consisting of 485 manufacturing firms, 36 service industry firms and 12 financial services firms, regression analysis is employed to examine the association between dividend payout (independent variable) and abnormal stock market returns (dependent variable). The study uses observations from 1993 to 1998 to arrive at the results, which fail to indicate any kind of strong and consistent association between the two variables.
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