Dividend policy and business groups: Evidence from Indian firms

Publication year: 2012
Source: International Review of Economics & Finance, Volume 21, Issue 1, January 2012, Pages 42-56

Ronny, Manos , Victor, Murinde , Christopher J., Green

We invoke theories of dividend policy and the market failure theory of business groups to investigate the impact of group affiliation on the dividend payment decision (to pay or not to pay?) and payout level decision (how much to pay?). We use a large sample of quoted, non-financial, independent and group-affiliated Indian firms. While we find that the payout ratios of group-affiliated firms are higher than those of independent firms, there is no clear evidence to support the view that this is due to the level of diversification or group size. Overall, we find that although they mitigate market imperfections,…