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Institutional perspectives of dividend policy in India

Author

Listed:
  • H. Kent Baker
  • Sujata Kapoor
  • Imad Jabbouri

Abstract

Purpose - This study aims to examine dividend policy from the perspective of institutional investors in India. It focuses on the level of importance these investors attach to the dividend policy of their investee firms, the level of influence they exercise in shaping such firms’ dividend policies and their reactions to changes in dividends. This study also reports how institutional investors view various explanations for paying dividends. Design/methodology/approach - A mail survey provides a profile of respondents and their firms, as well as responses to 29 closed-ended questions involving various explanations for paying dividends and 22 closed-ended questions on various dividend issues. Findings - The evidence shows that Indian institutional investors attach substantial importance to dividend policy and prefer high dividend payments. Their reactions to dividend changes are asymmetric. Taxes are a major driver for why they seek dividends, whereas liquidity needs to play little role in shaping their preferences. The two most commonly used methods of active monitoring are selling shares and communicating concerns to investee companies. Research limitations/implications - The number of responses limits the ability to test for statistically significant differences between the various competing hypotheses. Practical implications - The findings support multiple explanations for paying cash dividends and provide new evidence supporting the positive relation between inflation and dividend payments. Originality/value - This study provides the first survey evidence on the views of institutional investors on dividend policy in India.

Suggested Citation

  • H. Kent Baker & Sujata Kapoor & Imad Jabbouri, 2018. "Institutional perspectives of dividend policy in India," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 10(3), pages 324-342, August.
    • Handle: RePEc:eme:qrfmpp:qrfm-07-2017-0067
    DOI: 10.1108/QRFM-07-2017-0067
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    Citations

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    Cited by:

    1. Navin Chettri & Mekelle J. Kharkongor, 2022. "Dividend Payout and Firm Value Relationship: Role of Age and Size," Emerging Economy Studies, International Management Institute, vol. 8(2), pages 71-81, November.
    2. Sunaina Kanojia & Bunny Singh Bhatia, 2022. "Corporate governance and dividend policy of the US and Indian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1339-1373, December.
    3. Aleksandra Pieloch-Babiarz, 2022. "Catering to investor sentiment for dividends: contestability or collusion of the largest shareholders?," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(2), pages 435-457, June.
    4. Eugen-Axel Mihancea & Marilen-Gabriel Pirtea & Florin-Claudiu Boțoc, 2021. "Bibliometric Analysis on the Recent Trends in Dividend Policy Research," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1051-1059, December.

    More about this item

    Keywords

    India; Institutional investors; Dividends; Dividend policy; G3; G35;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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