Dividend Policy of Indian Corporate Sector: A Study of Select Companies during the Post-liberalisation Regime

Abstract

The effects of liberalisation in India have led to the companies to operate in a new economic environment. The entry of foreign companies has widened the opportunity of opening new avenues for the investors. So the companies found themselves in a complex situation. On the one hand, companies have to play a defensive role in the area of dividend payment to retain money to face any downtrend in the market conditions. On the other hand, they have to follow an aggressive dividend policy to attract investors who have greater choices for making investment in the post-liberalisation period. Therefore, it is high time to seek answers to some of the important questions that may arise here. The questions that may mainly be raised here are—‘How do finance managers of Indian companies adapt themselves to the changed circumstances in the post-liberalisation period?’, ‘What factors do they consider at the time of designing an appropriate dividend policy?’ and ‘How much importance do they pay to these factors while making their dividend decisions?’ In this backdrop, the present study seeks to analyse the factors that influence the dividend policy of selected companies in the Indian corporate sector during the period 1998–1999 to 2007–2008 and also to examine whether its findings conform to the theoretical argument.