Effect of Dividend Policy on Market Return: Empirical Evidence from South Asia

Abstract

This research is conducted with the objective to find out the affect of dividend policy on market return in South Asia Countries including India, Pakistan and Sri-lanka. This study support the fact that dividend policy is relevant in determining market return for a sample of firms listed in South Asia Countries. This research is to show that corporate dividend policy is a key driver of market return changes in South Asia Countries. A sample of 40 companies from India, Pakistan, Sri-Lank on the basis of highest market capitalization. Because in this all those companies include which declared dividend regularly and specially in this period in which market is classed such as 2006 to 2010. This study evaluate whether dividend influence on market return in this period other than normal period. South Asia market decrease due to bubble in developed countries and this study check the presence of dividend policy for this type of specific condition. In this study used debt to equity ratio, price earnings ratio, net profit margin, size, dividend per share are used independent variable and market return is used dependent variable. Data have passed all basic econometric such as Hetrosidasticity and autocorrelation. These two conditions are present that’s why in this study used ARCH GARCH model. Finally study react that dividend policy of any company helpful for the increase of market return and sustaining share price. South Asia market is dependent market here investor hesitated for long term investment. The challenge for management/accountants is to generally improve the standard of financial statement to avoid producing wrong information which could lead to wrong decision by investors.