Impact of Dividend Policy on Profitability and Share Price of NIFTY Companies

Abstract

Dividend policy is an important area in corporate finance since it is a tool to signaling the newlinefinancial performance and growth of the business enterprise to the investors. Dividend policy newlinedetermines dividend decision of the company that affects dividend payout of the company compared newlineto the retained amount of earnings of the company. Dividend decision differs from company to newlinecompany because it differs in sizes, ownership structures, etc. The objective of the study is to identify newlinethe factors that determine the dividend policy and to analyse impact of dividend policy on profitability newlineand share price of selected companies. The secondary data were collected from prowess database. The newlinecollected data was analysed using summary statistics, repeated measures ANOVA, correlation newlineanalysis, multiple regression analysis and panel data regression analysis. The determinants newlinecontributing to dividend policy identified from the study proves that the dividends disseminated highly newlineinfluence the dividend policies of financial, energy, IT and metal sectors. Automobile and newlinepharmaceutical sectors have shown growth prospects by making productive investments during the newlinestudy period and it highly influence the dividend policy. Dividend yield ratio has a significant positive newlineeffect on profitability while dividend payout ratio registered a significant negative effect on return on newlineasset and return on capital employed during the study period in the financial sector. On analysing the newlineeffect of dividend policy on share price, the metal sector depicts that the dividend payout ratio shows newlinepositive effect on share price. newlinei) Major objectives : newlineBased on the research questions, the following objectives were framed, newlineand#61623; To identify the factors that determines the dividend policy of select nifty companies. newlineand#61623; To examine the impact of dividend policy on profitability of select nifty companies. newlineand#61623; To analyse the impact of dividend policy on share price of select nifty companies.