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Dividend Policy, Ownership Structure and Corporate Governance: An Empirical Analysis of Indian Firms

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  • Amitava Roy
Abstract
In this article, we investigate the possible association between the firm's ownership structure and dividend policy and whether the corporate governance (CG) practices adopted by the firm have any impact on dividend policy. In India the presence of family-run firms, with concentrated ownership, is a reality and we try to understand whether such firms have any significantly different approach to dividend policy compared to non-family-run companies.The use of debt by firms in their capital structure acts as an additional monitoring mechanism and we propose to analyse whether this has any impact on dividend policy.We explore the determinants of dividend policy of Indian firms. Thus, firm characteristics which seem to have an impact on dividend policy, like profitability, liquidity, growth, income volatility, size and age are investigated. We use a panel of 51 top Indian listed firms, in terms of market capitalisation (BSE 100 and NIFTY 100), over the 5-year period from 2007–2008 to 2011–2012 for our analysis.We conclude that the CG variables, namely, board size, independent directors and the proportion of non-executive directors on the board have significant impact on the dividend policy of the firm.The proportion of cash and cash equivalent to total asset, used as a measure of firm liquidity, also has an influence on the dividend policy. Growth opportunities have a positive influence on the dividend policy of firms.

Suggested Citation

  • Amitava Roy, 2015. "Dividend Policy, Ownership Structure and Corporate Governance: An Empirical Analysis of Indian Firms," Indian Journal of Corporate Governance, , vol. 8(1), pages 1-33, June.
    • Handle: RePEc:sae:ijcgvn:v:8:y:2015:i:1:p:1-33
    DOI: 10.1177/0974686215574422
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    Cited by:

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    2. Ravichandran K. Subramaniam & Khakan Najaf & Murugasu Thangarajah, 2022. "Board Governance, Dividend Payout and Executive Compensation in Malaysian Firms," Capital Markets Review, Malaysian Finance Association, vol. 30(1), pages 17-35.
    3. Mehmet Levent Erdaş & Emel Bachá Sımoes, 2020. "The Relationship between Audit Mechanisms and Dividend Payout Policy within the Framework of Corporate Governance: The Case of Turkey," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 62(0), pages 255-284, December.
    4. Shailesh Rastogi & Rajani Gupte & R. Meenakshi, 2021. "A Holistic Perspective on Bank Performance Using Regulation, Profitability, and Risk-Taking with a View on Ownership Concentration," JRFM, MDPI, vol. 14(3), pages 1-22, March.
    5. 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.
    6. Naina Narang & Seema Gupta & Naliniprava Tripathy, 2023. "A bibliometric analysis of governance mechanisms in dividend decisions: an overview and emerging trends," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(4), pages 410-430, December.
    7. Muhammad Sadiq Shahid, PhD & Dr.Faid Gul & Muhammad Rizwan & Muhammad Hassan Bucha, PhD, 2016. "Ownership Structure, Board Size, Board Composition And Dividend Policy: New Evidence From Two Emerging Markets," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 12(2), pages 25-36.
    8. Juan Manuel San Martín Reyna, 2017. "Ownership structure and its effect on dividend policy in the Mexican context," Contaduría y Administración, Accounting and Management, vol. 62(4), pages 1199-1213, Octubre-D.
    9. Shakti Deb & Indrajit Dube, 2017. "Corporate Governance Disclosure for Complex Ownership Structure in India," Indian Journal of Corporate Governance, , vol. 10(2), pages 143-175, December.
    10. Duy T. Nguyen & Mai H. Bui & Dung H. Do, 2019. "The Relationship Of Dividend Policy and Share Price Volatility: A Case in Vietnam," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 123-136, May.
    11. Jorge Andrés Munoz Mendoza & Sandra María Sepúlveda Yelpo & Carmen Lissette Veloso Ramos, 2018. "Effects of Corporate Policies and Governance Practices on Ownership Structure: Evidence from Chilean Firms," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 10(2), pages 269-286, November.
    12. Mehmet Levent Erdaş & Emel Bachá Sımoes, 2020. "The Relationship between Audit Mechanisms and Dividend Payout Policy within the Framework of Corporate Governance: The Case of Turkey," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 62(62), pages 255-284, December.

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