A study on corporate governance and dividend payout: Evidence from selected Indian companies

Abstract

In this paper, we investigate the possible association between the corporate governance and dividend policy and whether the corporate governance practices adopted by the firm have any impact on dividend policy. The main objective of this paper was to determine effect of corporate governance on dividend payout of selected companies in India. The independent variable of this study was corporate governance as characterized by Age of Company, Board Size, Profile of BOD, BOD Meeting Attendances, BOD committees, Dividend Payment Mode, Social Responsibility and board independence while the control variables were profitability as measured by Price Earnings Ratio, Return on Assets, Return on Net Worth, Tobin’s Q Ratio, Debt Equity Ratio (Leverage), Net Sales, Net Profit Margin Ratio, Provision for Taxation. Dependent variable was dividend payout ratio which was measured using dividend per share divided by the earning per share. The study was able to use secondary data which was collected in a period of five years between the years 2014-15 to 2018-19. The study was able to used statistical tools like the hypothesis, correlation matrix, ANOVA and regression analysis checks the impact of different independent variable of governorate governance on divined payout ratio. We conclude that Age of Company, Profile of BOD, BOD committees, Dividend Payment Mode, Price Earnings Ratio, Return on Assets, and Return on Net Worth, Tobin’s Q Ratio, Net Profit Margin Ratio, and Provision for Taxation have positive impact on DPR and t test is also significant. Whereas independence variables like Board Size, BOD Meeting Attendances, Social Responsibility, Debt Equity Ratio and Net Sales have negative impact on DPR.