DETERMINANTS OF DIVIDEND POLICY OF PUBLIC AND PRIVATE COMMERCIAL BANKS IN INDIA: A PANEL DATA APPROACH
Keywords:
Dividend policy, Commercial Banks, Profitability, Size, Leverage, Growth Opportunities, Risk, Panel DataAbstract
The study investigates the factors influencing dividend payout of Indian commercial banks by using a fixed effects approach in panel regression. The study considers 19 public sector banks and 10 private sector banks during the period from 2007 to 2014. Profitability, size, liquidity, leverage, growth opportunities and risk are the factors considered in influencing dividend payout. Profitability has a negative effect on dividend payout and it concludes higher the profit of the bank, the less they prefer to pay out dividends. It could be due to the fact that profitable banks have more opportunities for growth. Risk found to be a positive effect on dividend payout and it confirms that lower the risk of the banks denotes low volatility in their cash flow, resulting in an increase of dividend payout. The liquidity of the banks has a negative effect on dividend payout and it concludes liquidity is essential for the smooth operation of banks. Size, leverage and growth opportunities are found unrelated to dividend payout of the listed Indian commercial banks.
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