Determinants of Dividend Policy in Indian Companies: A Panel Data Analysis

This article examined the determinants of the dividend policy of Automobiles companies and pharmaceuticals companies listed on Auto index and Pharma Index of the sectoral indices of national stock exchange in India. The study covers the tenure of ten years starting from 2006-2007 to 2015-2016. Static panel data model has been used for the analysis. From the literature review we identified the variables like profitability measure as Return on equity, Liquidity or cash flow, leverage (debt equity ratio), investment opportunities, dividend distribution tax, retained earnings, size of the company and sales growth of the company which affect the dividend decision of the company. The result of panel regression concludes that in automobiles sector Liquidity/Cash Flow, dividend distribution tax, investment opportunities and retained earnings are the significant factor which influence the dividend payout ratio where as in Pharmaceuticals sector profitability, debt equity ratio, sales growth and retained earnings are the significant factor for deciding dividend payout ratio.