Disappearing Dividends in Emerging Markets?: Evidence from India

Abstract

This study examines the dividend behavior of Indian corporate firms in an emerging market (India), identifying characteristics of dividend payers and nonpayers from 1991 to 2001. Dividend trends for a large sample of stocks traded on Indian markets indicate that the percentage of companies paying dividends declined, from over 57 percent in 1991 to 32 percent in 2001, and that only a few firms paid regular dividends. Even though regular payers consistently paid higher dividends than did other firms, on average, Indian firms became less likely to pay dividends by the close of the century. Dividend-paying companies were likely to be larger and more profitable than nonpaying companies, though growth opportunities do not seem to have significantly influenced the dividend policies of Indian firms.