Impact of dividend policy on share prices: A study on select Indian pharma companies

Abstract

This research studied the impact of dividend policy and the prices of equity shares of select companies in Indian Pharmaceutical sector. For the study, the data of Market prices of equity shares along with the Dividend Payout Ratio and Dividend Yield of time series for the period from 2008–09 to 2017–18 has been considered. The vector error correction model is applied to measure the long and short run relationship between the dividend payout ratio and dividend yield with the equity share prices which indicated that share prices of Dr Reddy's and Sun Pharma have short run relation whereas Cipla, Gsk Pharma and Torrent Pharma have long run relation. Results of the robust least square method results showed that the dividend payout ratio has significant impact on the share prices. This research paper will interest retail, HNI, QIB and other institutional investors in that that they can comprehend the changes in the share prices with reference to the dividend policies of the subject companies.