What Kind of Indian Firms Omit Dividend? An Enquiry into Firm Characteristics and Propensity to Pay

Abstract

Through a temporal-spatial analysis over 1971 through 2007 for India, we attempt to study what kind of firms omit cash dividend, and how the cash dividend payers and non-payers over the size and sign of earnings heterogeneity differ in respect of their different financial characteristics and propensity to pay? It is examined whether changing firm characteristics and/or changing propensity to pay determine corporate dividend decisions and influence them to pay or omit cash dividends. In line with the global trends we uncover evidence in favor of decreasing cash dividend payment behavior among Firms in the post-reform periods compared to the former. A significant decrease in the number of firms paying equity cash dividends is documented across small, medium, and large firms and also across firms reporting profits and losses in the further-reform periods. Very importantly we identify and attribute the reason to omit dividend to decrease in general likelihood (propensity) by firms to pay, despite their characteristics.