Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Do firm characteristics of concentrated ownership firms affect dividend payout beyond traditional motivations?

Do firm characteristics of concentrated ownership firms affect dividend payout beyond traditional... This study aims to analyze the influence of firm characteristics in dividend payout in a concentrated ownership setting.Design/methodology/approachThis study is probably the first to use the lasso technique for model selection and error prediction in the study of dividend payout in India. The lasso method comprises subsampling the available data set and performing reiterative regressions on those samples to generate the model with the best fit. This study incorporates four different ways of performing lasso treatment to get the best fit among them.FindingsThis study analyzes the influence of firm characteristics on dividend payout in the Indian context and asserts that firms with growth potential and earnings volatility do not hesitate to cut dividends. This study does not find evidence for signaling, agency cost and life cycle theories in a concentrated ownership setting. Earnings is the single most important factor to have a positive influence on dividend, while excessively leveraged firms are restrictive of dividend payout. Taxation has a prominent role in altering the way firms pay dividend.Research limitations/implicationsThe recent changes in buyback taxation offer another opportunity to test the reactive behavior of firms. Also, given the disregard for traditional motivations, further research needs to be done to determine if dividend adjustments (on the lower side) help enhance firm value or not.Practical implicationsThis study may help investors view dividends in a proper perspective. Firms give importance to investments over dividends and thus investors need not dwell on dividend changes if firms fulfill their growth potential.Social implicationsIt lends perspective to investors about dividend changes and its importance.Originality/valueThe methodology used for analysis is absolutely original in the literature pertaining to dividend policy in the Indian context. The literature is abundant with theories advocating or opposing the eminence of dividend payout; however, this study takes a holistic view of all influential dividend determinants in literature to understand dividend payout. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Indian Business Research Emerald Publishing

Do firm characteristics of concentrated ownership firms affect dividend payout beyond traditional motivations?

Journal of Indian Business Research , Volume 13 (2): 19 – Jul 15, 2021

Loading next page...
 
/lp/emerald-publishing/do-firm-characteristics-of-concentrated-ownership-firms-affect-iZWuY8i4SP
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1755-4195
DOI
10.1108/jibr-05-2020-0149
Publisher site
See Article on Publisher Site

Abstract

This study aims to analyze the influence of firm characteristics in dividend payout in a concentrated ownership setting.Design/methodology/approachThis study is probably the first to use the lasso technique for model selection and error prediction in the study of dividend payout in India. The lasso method comprises subsampling the available data set and performing reiterative regressions on those samples to generate the model with the best fit. This study incorporates four different ways of performing lasso treatment to get the best fit among them.FindingsThis study analyzes the influence of firm characteristics on dividend payout in the Indian context and asserts that firms with growth potential and earnings volatility do not hesitate to cut dividends. This study does not find evidence for signaling, agency cost and life cycle theories in a concentrated ownership setting. Earnings is the single most important factor to have a positive influence on dividend, while excessively leveraged firms are restrictive of dividend payout. Taxation has a prominent role in altering the way firms pay dividend.Research limitations/implicationsThe recent changes in buyback taxation offer another opportunity to test the reactive behavior of firms. Also, given the disregard for traditional motivations, further research needs to be done to determine if dividend adjustments (on the lower side) help enhance firm value or not.Practical implicationsThis study may help investors view dividends in a proper perspective. Firms give importance to investments over dividends and thus investors need not dwell on dividend changes if firms fulfill their growth potential.Social implicationsIt lends perspective to investors about dividend changes and its importance.Originality/valueThe methodology used for analysis is absolutely original in the literature pertaining to dividend policy in the Indian context. The literature is abundant with theories advocating or opposing the eminence of dividend payout; however, this study takes a holistic view of all influential dividend determinants in literature to understand dividend payout.

Journal

Journal of Indian Business ResearchEmerald Publishing

Published: Jul 15, 2021

Keywords: Agency costs; Signaling; Cross-fit partialing out; Lasso; Prediction error; C53; G35

References