Dividend policy and corporate life cycle: a study of Indian companies
ISSN: 0307-4358
Article publication date: 16 May 2023
Issue publication date: 24 October 2023
Abstract
Purpose
The purpose of this paper is to investigate the relationship between dividend policy and the life cycle of firms in India. In addition, this study intends to examine the variation in dividend behaviour over the life cycle of a firm. The study anticipates that a firm's dividend behaviour varies over its life cycle.
Design/methodology/approach
To scrutinize the validity of the proposition, the authors classify 1968 non-financial industrial firms listed at Bombay Stock Exchange (BSE) into growth, mature and stagnant firms over the period 2000–20. Additionally, to check the robustness of the results, they use an array of techniques such as analysis of variance, pooled ordinary least squares, fixed effects models and random effects models.
Findings
The empirical findings suggest that dividend behaviour varies over a firm's life cycle. Specifically, stagnant firms are paying significantly higher dividends than growth firms. Mature firms are paying significantly higher dividends than growth firms. The results are consistent after controlling the effects of firm's size, profitability, leverage, operating risk, systematic risk and growth opportunities.
Research limitations/implications
The findings are useful for corporate decision makers in establishing an appropriate dividend policy conditional on firms' life cycle stage and for shareholders in making investment decisions.
Originality/value
The relation between dividend policy and firm life cycle has not been examined before in the context of Indian stock market. Thus, this research bridges this gap in the literature.
Keywords
Acknowledgements
The authors received no financial support for the research, authorship and/or publication of this article. The authors would like to thank Prof. Don T. Johnson (editor) and anonymous referee for their insightful comments and suggestions which have contributed towards significantly enhanced the quality of this paper. The authors are grateful to the editorial/publishing team and South Campus Library (University of Delhi) staff members for their excellent assistance. The authors also thank researchers at their department particularly, Dr Narain Chandra, Dr Harendra Nath Tiwari, Dr Narander Kumar Nigam, Dr Saumya Jain, Dr Prateek Bedi, Dr Mehak Sharma, Surendra Kumar, Deepak Verma and Arushi Jain for their valuable inputs.
Citation
Singh, R., Gupta, C.P. and Chaudhary, P. (2023), "Dividend policy and corporate life cycle: a study of Indian companies", Managerial Finance, Vol. 49 No. 11, pp. 1722-1749. https://doi.org/10.1108/MF-01-2023-0053
Publisher
:Emerald Publishing Limited
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