Capital Structure Decisions and Its Impact on Dividend Payout Ratio during the Pre- and Post-period of Recession in Indian Scenario: An Empirical Study

Abstract

In this study, an attempt has been made to investigate the influence of capital structure decisions on dividend payout ratio for the companies belonging to BSE500 in India during the pre- and post-period of the recent global recession. The pre-recession period has been taken from 2001–2002 to 2006–2007 while the post-recession period from 2007–2008 to 2012–2013. The dependent variable taken into consideration is the Dividend Payout ratio and 10 independent variables which might have some impact on the dependent variable taken into consideration are Business Risk, Size (Log Sales), Size (Log assets), Growth Rate (Assets), Interest Coverage Ratio, Degree of Operating Leverage, Financial Leverage, Return on Assets, Tangibility and ‘Non-Debt Tax Shield. Logistic regression has been utilized in this study. It is found from the study that Growth Rrate (Assets) and Profitability (Return of Assets) are significant variables influencing the dividend payout ratio in the prerecession period, while Profitability (Return of Assets) and Financial Leverage are significant variables influencing dividend payout ratio in the post-recession period.