*2.3. Dividend Policy and Industry Influence*

While selecting a payout policy, a firm considers various factors such as earnings, profitability, size, debt, cash flows, and many other economic factors as discussed above. Additionally, a firm also evaluates the payout policy of other firms in the same sector, before deciding its dividend policy. While a few past studies have evaluated the industrial sector's influence on dividend payout, there is no consensus.

Michel (1979) have evaluated twelve industries in the United States using the Kruskal–Wallis one-way analysis of variance. They have reported statistically significant variations in the dividend payouts for these sectors. Marsh and Merton (1987) also propose that firms detect industry practice before selecting a target dividend payout for themselves. However, its effect has not been tested explicitly by them. Baker (1988) has updated the study conducted by Michel. He also finds support for industry influence on dividends.

Pandey (2003) has studied the dividend payout for six industrial sectors of Malaysia. The author uses non-parametric, Kruskal–Wallis (K–W) one-way analysis of variance of ranks (Michel 1979; Scott and Martin 1975), and finds that the dividends of these companies differ across industrial sectors.

However, Baker et al. (2002) report that the company's industry type does not influence the manager's views in respect of dividends.

Mohamed et al. (2012) have suggested that the study of dividend policy can be widened by including an analysis across industries, and adding other characteristics that influence dividend policy.
