DIVIDEND POLICY AND ITS DETERMINANTS IN INDIAN COMPANIES (PUBLIC & PRIVATE)
Km. Deeksha Sharma
UNDER THE GUIDANCE OF Prof. Dr. Saumya Vatsyayan
MASTER OF BUSINESS ADMINISTRATION
School of Business
Galgotias University
Abstract
As time has gone on, investor expectations and attitudes have also changed to reflect the dynamic nature of risk and its variable sources. The process by which investors used to make investment decisions has changed as a result of the general unpredictability of the investment horizon. The corporate entities have been making every effort to achieve the fundamental business objectives while taking into account the type of investors and ensuring dividend policy optimization. Consequently, corporations and the investment community are exploring various dividend criteria and qualities in order to optimize their benefits, both qualitatively and quantitatively. As a result, the stakeholder community's ongoing activities have accelerated the evolution of theoretical and empirical concerns pertaining to dividend policy.Theoretical arguments concerning dividends, which date back to the groundbreaking research of Linter (1954) and Modigliani & Miller (1961), opened the door for a thorough emergence of arguments for and against it, which the esteemed figures in the finance and investing fields progressively came to refer to as the "dividend puzzle." The question of whether or not to pay dividends has taken the form of several theoretical claims that address various aspects to which the community of stakeholders is exposed. As a result, ideas have been categorized according to how relevant or irrelevant the dividend policy is to the community of stakeholders. Prominent scholars have advanced a variety of views about the dividend policy dichotomy. According to the irrelevance proposition, dividend policy only has an impact on the amount of outside funding needed for projects that have a positive net present value, meaning that every dollar delivered to shareholders represents a capital loss. This hypothesis states that the company's unique investment strategy, not the dividend policy that companies adhere to, is the only factor limiting the company's market value. This is so because initiatives in the future are under the purview of investment policy (MM 1961). Therefore, the choice made by the corporation regarding the distribution of cash or non-profit shares would not have an impact on the company's market value, and consequently, the wealth of its owners. According to this concept, managers should prioritize the investment policy more and allow the dividend policy—also referred to as the residual policy—to take precedence over the investment policy.
