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Corporate Governance and Dividends Payout in India

Jayesh Kumar is Economist at Watson Wyatt Worldwide. Jayesh.Kumar{at}watsonwyatt.com

This article investigates the association between corporate governance and the dividends payout policy for a panel of Indian corporate firms over the period 1994–2000. We explain the differences in the dividend payout behaviour of the firms with the help of firms' financial structure, investment opportunities, dividend history, earnings trend and the ownership structure. We find a positive association of dividends with earnings and dividends trends. Debt-equity ratio is found to be negatively associated, whereas, past investment opportunities exert a positive impact on the dividends. Ownership by the corporate and directors is positively related with dividends payout in level and corporate ownership is negatively related in square. Institutional ownership has inverse effect on dividends in comparison to corporate ownership in levels as well as in its squares. We find no evidence in favour of an association between foreign ownership and dividend payout growth.

Key Words: JEL Classification: G32 • JEL Classification: G35 • Corporate governance • ownership structure • dividends payout • India

Journal of Emerging Market Finance, Vol. 5, No. 1, 15-58 (2006)
DOI: 10.1177/097265270500500102


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