Financial Management Analysis of Dividend Policy Pursued by Selected Indian Manufacturing Companies

Corporate managers are actively engaged to take business and financial decisions which results in long term value to their shareholders. Managers pursue this goal through their investment, financing and dividend decisions. Dividend policy refers to the payout the management decides to compensate their shareholders for having assumed the risk of investment. The pattern and payment of dividend reflects on the company's financial position and it is a valuable source of information for investors, managers and lenders. The present study is to analyze the pattern and the determinants of dividend payout by Indian manufacturing companies, measured in terms of Return on Equity, Economic Value Added and the liquidity position of the company; and to explore if there is there any value creation to shareholders in the long run in terms of increase in market price per share; increased market capitalization; and improved reserve position in the sample companies. The correlation analysis shows that there exists a positive correlation between Dividend and Economic Value Added for most of the companies under study. The results of analysis through Multiple Regression and General Linear Model indicate that, economic value added explains the dividend payment decisions of most of the sample companies. The study also shows that the consistent and high dividend paid by these companies is not adding any value to the shareholders in the long-run with the exception of a few companies