Dividend Policy Determinants Of Indian Services Sector: A Factorial Analysis

Abstract

Profitability has always been considered as a primary indicator of dividend payout by a company. Factors other than profitability namely cash flows, dept equity ratio, retained earnings, sales growth, share prices of a company, capital expenditure and beta etc. also affect dividend decisions of an organization. Existing literature suggests that dividend payout is positively related to profits, cash flows while Capex, retained earnings, sales growth, share prices, beta, interest paid and debt equity ratio have inverse relationship. In the present study a set of 22 key variables that affect the dividend payout of a firm have been identified. In the past, researchers have used several proxies to represent these determinants. Authors have tried to find out which proxy variable is most relevant in the present scenario. This paper attempts to give a focused overview of the important dividend theories and empirically analyze the determinants of dividend behavior of Indian Services sector. The relationship between key variables has been explored with the aid of statistical techniques of Factor analysis Thus, the main theme of this study is to examine the various factors that influence the dividend policy decisions of firms in Services sector in India.