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The purpose of this paper is to examine the factors affecting the dividend policy of knowledge intensive firms (KIFs).

The study collects data for 86 KIFs listed on the National Stock Exchange (NSE) of India. The Hausman test is applied to choose an appropriate model. Based on the results of the Hausman test, the random effects panel regression method is applied to investigate the determinants of the dividend policy of sampled firms.

The authors test the effects of six factors on the dividend policy of KIFs, namely, profitability, leverage, free cash flows, firm size, investment and growth opportunities and liquidity. The study found that profitability, free cash flows, liquidity and firm size are significant determinants of the dividend policy of KIFs, while growth and investment opportunities as well as leverage have insignificant effects on the dividend policy of KIFs.

Findings of previous studies on factors affecting dividend policy across various industries cannot be generalized to other industries because of the industry influence on dividend policy. Considering this industry effect on dividends, the present research investigates the dividend policy of KIFs. The KIFs have emerged relatively recently owing to technological advances and remain relatively less explored industry in the context of dividends. Therefore, the paper presents new evidence on the dividend policy of Indian KIFs.