Dividend Smoothing and Business Groups: Evidence from Indian Companies

Labhane, Nishant B.; Mahakud, Jitendra

doi:10.1177/0972150917713866

Cited by 5 publications

(1 citation statement)

References 51 publications

(88 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This indicates that the insiders act opportunistically when they retain capital even when future performance does not improve. Examining the dividend smoothing behaviour of the sample firms in India, Labhane and Mahakud (2018) find significant differences between the dividend smoothing behaviour of the standalone firms and the firms affiliated with business groups. The business group-affiliated firms tend to smooth their dividend payments more than that of the standalone firms, and the actual payout ratio as well as the target payout ratio of the business group-affiliated firms are higher than that of the standalone firms.…”

Section: Review Of Literaturementioning

confidence: 90%

Dividend Policy Decisions in India: Standalone Versus Business Group-Affiliated Firms

Labhane

2018

Global Business Review

Self Cite

View full text Add to dashboard Cite

This study examines the determinants of two important dividend policy decisions specifically the dividend payment decision and the dividend payout level decision of 781 sample Indian firms enlisted on National Stock Exchange (NSE) over the period, 1995–2015, comparing the business group-affiliated firms with the standalone firms. In term of characteristics, the business group-affiliated firms are larger, more profitable and more levered than the standalone firms. The empirical results suggest that the dividend policy decisions of business group-affiliated firms differ significantly from that of the standalone firms. In the case of standalone firms, the firms with high investment opportunities, high financial leverage and high business risk are less likely to pay dividends, and their dividend payout levels are lower. On the other hand, the firms affiliated with business groups are more likely to pay dividends, and their dividend payout levels are higher even when they have high investment opportunities, high financial leverage and high business risk. Overall, the findings suggest that although the business groups are able to create internal capital markets (ICMs) and shield their member firms from market imperfections, they may suffer from other information asymmetry problems.

show abstract

Section: Review Of Literaturementioning

confidence: 90%