Dividend Payout Behaviour and Market Price: Evidence from Selected BSE Listed Companies

Abstract

Dividend distribution and its effects on various aspects of firm is becoming the crucial issue of the firm. The main aim of the study is to know the impact of dividend payout on market price, including other selected independent variables that are required to measure dividend and investment decision. The study has selected 48 companies listed on Bombay Stock Exchange based on high and consistent dividend for the time period from 2008 to 2017. The study covers market price as dependent variable whereas dividend payout, earnings per share, growth, return on equity as independent variables. For the study purpose, to check the multicollinearity, variance influence factor has been used. Balanced panel data and pooled ordinary least square regression has been run to check the impact of independent variables on dependent variables. Correlation is used to check the relationship between the variables. The study found high and significant impact of dividend payout, earnings per share and growth on market price of shares whereas return on equity has no significant impact on market price of shares. The study also revealed the negative and significant correlation between dividend payout and market price. It means increase in dividend payout decrease the market price and vice-a-versa. It also shows dividend payout and growth have positive significant impact. It indicates that high growth companies are paying high dividends. The study revealed that Return on equity has insignificant correlation with dividend payout. The study is useful to the individual investors, institutional investors and companies in terms of sound investment purpose.

Keywords: Dividend Pay-Out, Market Price, Growth, Earnings Per Share, Panel Data

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