An empirical study on the dividend determinants of Indian textile firms

Dividend decision is a major decision area and a highly debated issue in corporate finance. Academicians, researchers and finance professionals have undertaken numerous studies on dividend decisions and the related issues like signaling effects, determinants of dividends, effect of corporate tax, price response to announcement of dividends and so on. But we are not able to give a satisfactory explanation for the dividend decisions of corporates. This study examines the leading determinants of dividends of Indian textile firms for the period 1989–2009 by using backward elimination regression technique. The study is conducted for the individual firms and for the pooled data of all the firms. The analysis of individual firms shows that different variables determine the dividends of firms and no single variable has emerged as unique factor influencing the dividends in Indian textile firms. The study of pooled data shows that lagged dividend, operating cash flows, free cash flow, size, liquidity, leverage and tangibility are the significant determinants of dividend payments.