Determinants of Dividend Policy in India – Special Reference to Nifty 50 Companies

Abstract

Dividend policy is the firm’s policy considered to structure the dividend payout of the shareholder of the company. Various factors are responsible for determining the dividend payout of the firm. In this research paper, we are exploring the determinants of the dividend policy of NSE, Nifty 50. This paper studies the impact of six basic variables on the dividend payout of NSE, Nifty 50 Index companies for the financial year 2015-16 to 2019-2020. These factors include liquidity, leverage, firm size, return on equity, risk and tax rate. Multiple regression analysis was used to study the impact of selected variables on the dividend policy of the companies under study. The results reveal that return on equity has a significant positive impact on dividend payout, whereas risk and tax rate have a significant negative impact.
In contrast, there is a positive relationship and zero significance was found between liquidity and dividend payout and leverage and dividend payout. A negative relationship and no significance was found between the size of the firm and dividend payout. This means that liquidity, leverage and size of the firm failed to have any significant impact on the dividend payout of the companies under study.