Title: Determinants of dividend policy: a study of the Indian banking sector

Authors: Sangeeta D. Misra

Addresses: Indian Institute of Management, Prabandh Nagar, Off Sitapur Road, Lucknow – 226013, India

Abstract: This study attempts to analyse the factors which influence the dividend policy of Indian banking firms. Using panel data pertaining to 121 Indian banks, two regression models have been proposed, one showing dividend payout ratio and the other showing dividend rate as a dependent variable. The study considers both bank specific internal variables as well as macroeconomic variables as explanatory variables influencing the dividend policy of Indian banks. The results of the determinants of dividend payout ratio of Indian banks show growth rate of real GDP affecting dividend payout ratio positively and significantly, and also show return on assets and total deposits to total assets ratio of Indian banks affecting their payout ratio negatively and significantly. The results of the determinants of dividend rate show no variable emerging as a significant determinant, indicating the fact that Indian banks consider dividend payout ratio to be a better measure of their dividend policy.

Keywords: dividend payout ratio; dividend rate; Basel; return on assets; ROA; gross domestic product; GDP; capital adequacy ratio; India; dividend policy; banking industry; banks.

DOI: 10.1504/IJICBM.2015.072427

International Journal of Indian Culture and Business Management, 2015 Vol.11 No.4, pp.440 - 456

Received: 23 Sep 2014
Accepted: 01 Nov 2014
Published online: 13 Oct 2015 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article