**3. Data and Methodology**

## *3.1. Sample Selection*

The Indian stock market consists of two main stock exchanges, namely, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), apart from many other regional stock exchanges. Almost all of the significant Indian companies are listed on both these exchanges. We considered the data of all of the companies in NIFTY 500 NSE-index for the period of 2006 to 2017. The sample period was chosen to signify the current state of companies in India. NIFTY 500 index represents the top 500 companies listed on NSE based on full market capitalization. It represents 95.2% of the free float market capitalization of stocks listed on the NSE as of 31 March 20172. The financial data of all of the companies were obtained from the Prowessdx database. The financial performance of all of the Indian companies were provided by the Centre for Monitoring Indian Economy (CMIE) in this database. It is the largest database, and the financial statements contained therein are standardized and do not suffer from any deliberate survival bias. Although data were extracted for all 500 companies, because of the absence of data for a few companies for entire time-period from 2006 onwards, the final analysis was done on 424 companies only. Outliers were also removed using a statistical three-sigma method. Hence, a balanced panel data of companies for 12-years, from 2006 to 2017, was used. Every company in CMIE is associated with an industry group. These industry groups have been formed by studying the number of companies in the clusters of industries, as per the detailed products and services classification3. Based on these industry group codes provided by CMIE, the 424 companies under selection have been grouped into sixteen sectors.

Total dividend divided by total assets was used to determine the dividend policy of a company, and is considered as the dependent variable in this study. The dependent variable, as well as the explanatory variables, were carefully chosen based on the literature review. Table 1 presents the number of companies considered under each industrial sector, along with the sector codes used in the paper and the sector-wise mean of the dividend/total assets (Div/TA).


**Table 1.** Summary of the number of companies considered under each industrial sector along with the sector codes and the sectoral mean of dividend/total assets (Div/TA). IT—information technology; ITES—IT enabled service.

<sup>2</sup> A detailed description of NIFTY 500 companies is available under https://www.nseindia.com/products/content/equities/ indices/nifty\_500.htm.

<sup>3</sup> The detailed definition of all variables is available under prowess dictionary at https://prowessiq.cmie.com.
