Dividend Policy on Shareholders Wealth – Evidences from Indian Pharmaceutical Industry

Abstract

Background/Objectives: This topic on the impact of dividend policy on shareholders wealth of the companies is one of the most researched topics in finance. The main objective of this paper is to find out the dividend policy’s impact on shareholders wealth. Method/Statistical Analysis: The ten companies listed in NIFTY PHARMA of NSE have been considered for the study. Fifteen years data have been used (2001 to 2015). With the help of previous literature, MPS (Market Price Per Share) used to measure Shareholders wealth and the predictor variables are Price Earnings Ratio (PER), Dividend Per Share (DPS), Earnings Per Share (EPS), Total Assets (TA) and Cash and Bank Balance by Total Assets (CABBBYTA) were used by representing Dividend, Risk, Earnings, Firm Size and Liquidity of the companies. The Descriptive statistics and Normality test (Jarque - Bera) test found that the data were normally distributed. The conditions for regression like viz., Breusch-Pagan-Godfrey Heteroskedasticity Test, Breusch-Godfrey Serial Correlation LM Test, VIF for Multicollinearity, Augmented Dickey-Fuller test for unit root were used and found that the data were homogenous, free from auto correlation, multicollinearity and unit root. Eviews 7 Econometrics software package was used. Findings: Regression results show that the dividend, risk and liquidity of the companies impact shareholders wealth. Size and Earnings of the companies were insignificant with the shareholders wealth.