Dividend Payment Decision - An Empirical Analysis of Indian Passenger Vehicle Industry

Dividend Pay-out Ratio is of prime significance for any company because of its impact on long term as well as short term business strategies. As Dividend payment decision affects valuation of shares as well as valuation of firm, ascertainment of variables responsible for it is very crucial for management. In order to ascertain determinants of the dividend pay-out ratio, the model has been developed using data of Indian Passenger Vehicle Industry for a period of 7 years from 2002–03 to 200809 based on the Multiple Linear Regression consisting of one dependent variable (The Dividend Pay-out Ratio) and five independent variables (Profitability, Liquidity, Operating Activities, Taxation, and Earning Retention). The study found that Profitability, Taxation and Earning Retention have been found favourable to boost Dividend Pay-out Ratio in Indian Passenger Vehicle Industry; while Liquidity and Operating Activities were two variables which affected Dividend payment decision of Indian passenger vehicle industry adversely.