Corporate governance and dividends payout in India

Abstract

This paper investigates the association between the corporate governance and the dividends payout for a panel of Indian firms over the period 1994-2000. We explain the differences in the dividend payout behavior of the firms with the help of firm’s financial structure, investments opportunities, dividend history, earnings trend and the ownership structure. We find a positive association of dividends with earnings trend and investments opportunities. Debt equity ratio is found to be negatively associated, whereas past in-vestment opportunities exert a positive impact on dividends. Ownership by the corporate and directors is positively related with dividends payout in level, and corporate ownership is negatively related in square. Institutional ownership has inverse effect on dividends in comparison to corporate ownership in levels as well as in its squares. We find no evidence in favor of association between foreign ownership and divided payout growth.