Understanding Dividend Decisions: Evidence from India's Automobile and Textile Sectors

Abstract

Purpose: The current research has been taken to know the factors having influence on dividend policy of two major sectors of Indian economy. The studied two sectors are- automobile sector and textile sector.

Design/methodology: The author uses the secondary data approach to collect data from a sample of 30 S&P BSE listed firms.

Findings: It has been found that across the sectors considered in the present study, the dividend policy of automobile industry significantly influenced through tangibility, leverage, risk and growth. The dividend payment decision of textile industry is determined through tangibility, growth and risk. The dividend payout ratio of textile industry on an average is the highest as compared automobile sector.

Research implications: A limited sample of thirty companies for ten years has been used for the current study. It’s also possible that psychological and behavioral factors may also influence the choice to declare dividends. The current research does not take those factors into consideration. Hence, the variables taken into the study are generic.

Originality/value: This paper gives a new evidence of dividend policy of Indian automobile and textile sector. The findings provide the investors an insight to choose the sector before the investment as per the expectations and requirements. If an investor wants a regular income, then the investment should be made in the textile firms. Just the opposite, if the investor prefers capital gains rather than receiving regular dividends, the alternative automobile companies.